Problem #1: We have far too many vacant homes and inventory.
Solution: We need to move/sell or fill up the vacant inventory RIGHT NOW!
Problem #2: Tough Lending Standards, Money is hard to access/receive
Solution: Get easy FHA loans or buy with seller (owner) financing
Problem #3: Many poorly written loans were made/created
Solution: Sell the houses or rewrite and modify those existing loans

There are many potential buyers on the sidelines right now that want to help buy these vacant homes, unfortunately the potential buyers feel their hands are tied due to tough lending standards in the current market.  It’s time that those in Minnesota and the U.S. real estate market start to make some very tough decisions.

FHA financing:
Yes, lender’s guidelines are much tougher, but there are some extremely easy guidelines out there right now through FHA financing programs.  Unfortunately most real estate agents and loan officers may not yet know about FHA, or know how easy the standards are at this time. The reason is either they haven’t heard about it, or they don’t know it became popular again around the end of 2007.  I won’t go into all of the FHA guidelines at this moment, but many buyer’s can be qualified with only a minimum 600 credit score, in fact I have heard it’s being done in this current financial market, even as low as a 550 credit score (possibly not through FHA, but by other means).  Through the end of September 2008, there are still ways to get down payment assistance from a seller for 100% financing. At this time, interest rates are extremely low still, and competitive.  Update: Legislation is Still trying to keep down payment assistance alive, just don't count on it to be that way for now, plan on 3%+ down for now.

FHA qualifying Standards:
Current FHA standards allow for  your credit report to reflect a foreclosure as recent as 3 years ago.  It can show a bankruptcy from 2 years ago, and a job (same line of work) for only 2 years.  I think you’ll agree that these current standards are pretty easy on buyers.  Fannie Mae and Freddie Mac are the alternative to FHA financing, and as we know after watching the news that these two companies have received a bailout, and their new guidelines may require someone to wait 5-7 years to get a loan after a recent foreclosure.  Many future loan guidelines are expected to get tougher, so take advantage of the easy loan standards as they stand today.

How bad will the market get?
It’s now time I get very honest with the current and future real estate and economic situation.  The problem is that the housing market has very poorly written financial instruments (loans).  Without getting too technical in this article, we have loans that have been created that aren’t worth any company keeping or holding on their books.  Not all loans are like this, but adjustable mortgages were not a good idea, and we’ve all had this confirmed by watching the news and the growing rate of foreclosures.   The problem lies in the fact that many were written just a few years ago, and are on 2-5 year cycles before they will adjust on the homeowners.  What that mean’s is that maybe only one half have adjusted and run their course already.  Many of the loans will just keep adjusting well until the year 2010 at the very least.  I would suggest that everyone stop worrying about which president will be in office in 2009, or which new laws are going to save you. It’s a bigger problem than just a new president, or some new mortgage laws, this is far more complex. It includes many businesses, companies, real estate law, etc.  For example, there are those servicing the loan, there are also those that originally invested and put up all of the money with the bank.  It's those investors that would have to agree to the mortgage modifications and other changes in rewriting the existing loans.  Please read the following articles on the future of real estate:
1 MILLION going into Foreclosure
Brokers ready to COLLAPSE
Big Housing Decline Ahead
Over 40% of House Sales are Distress Sales
Housing Timebomb
Housing Market Going Down
ARM Reset Chart
25% of SOLD's are for a LOSS

Time for us all to work together
Let’s all deal with the bad economic news and make the most of it.  We have to all work together on a state level, and a national level.  We need to move all of this inventory as a team.  Property owners will have to face tough decisions, some will need to sell, some will need to rent out their properties and become landlords, others will need to sell in foreclosure, or on a short sale (due to owing more than the house is worth).   As a buyer if you are not able to qualify for at least FHA financing in this current market, please do look into renting some of this inventory, or buying with the help of seller financing, so that we can decrease all of these vacant homes in this current market. As we know, vacant homes aren’t good for any one of us. We need to correct this problem, so that everything can get back on track again.  There are tough decisions for buyers and seller’s to make due to the current economy, rising inflation, rising fuel prices, rising food prices, and annual incomes that don’t seem to be keeping in line with inflation.  Due to increasing job losses which at the time of this writing is 100,000+ per month, we have families with less income, and many people need to cut back and downsize their current residence.  Let’s all make the tough decisions now, and move forward with this economy and housing market and keep things moving again.

What decisions do we make?
If you can qualify for FHA financing with little money down and a 550-600+ credit score, like discussed earlier, than you should get a FHA loan, I would recommend over a 580+ credit score. If you have pretty clean credit and good assets it's possible to do it with less, also we can put you in touch with a credit repair person.  On the other hand, if you have less than the equivalent of 1^st months rent and a deposit right now, you are really considered a renter.  I would recommend that you check the newspapers and rentals.com to find a place to live as your best option.
    
If you have more than 3 months of rent to put down, some seller’s will allow for you to rent with the option to buy, also known as a rent to own.

If you have 5%-10% to put down on a house, often that will allow enough money to pay a buyer’s agent and a seller’s agent, so that you can buy a house on a contract for deed for right now and get financing in the near future, possibly 1-3 years from now, and this all can be negotiated and structured.

Before you do commit to any of the seller financing decisions discussed above, while having poor credit, you should be aware that many current laws by Fannie Mae and Freddie Mac are ruling that you need 5-7 years to pass by (elapse) before someone can finance a house in the situation where someone has recently lost a house to the foreclosure process.  This is very important to know before you get into a contract that states you to need to get financing in a short period of time.  Your future chance at qualifying is also important to know before you put a lot of money down, or years of time into something, Selling on a short sale shortens this amount of time by quite a bit, more on that below.
Even a recent short sale or foreclosure on your credit report can limit you to when you can finance your next house.  If you are going to sell your current house on a short sale, or possibly lose it to the bank you should know these rules and guidelines ahead of time. Here are the guidelines at this link: Fannie Mae guidelines for foreclosures and short sales.

Property Owner Decisions   
As a property owner, you have some very tough decisions to make today. Let me give you some ideas to put property owners in the right direction.  If the payment on your current house has adjusted, or is about to adjust and you can’t afford the payment now that it's adjusted, or can predict that you won't ahead of time, or even the case if you were to rent out your property, you know you would have a significant negative cash flow that you can not afford, in this situation, you will need to sell the house, or do a mortgage modification with your bank.  If you owe too much on the house, you will want to sell sooner than later to avoid falling behind on payments and eventually lose your house to foreclosure.  How do you know if you owe too much?  If you put little(3-5%) to no down payment and bought a house after 2003, there is a very likely chance you owe too much currently as of this date and real estate market, but you never fully know until you get the house listed and on the market to test the price, but before you do that, you should talk to an associate of mine.  A local real estate agent who I would know would be familiar with your market. That agent can run some comparable sold houses for you before you decide to list your house.   Before you list your house, or sell on a short sale you would need to provide some information about your current loan on the property to get the short sale process started.
   In the situation where your current house has a good loan attached to it, meaning a good interest rate, and a fixed rate for a few years, it may make sense to rent out the house for now, or sell on a contract for deed.  Either way, the point is for all of us to fill up some vacancies and move some of this inventory off the market, so that we can keep this market inventory moving again.   Everyone needs to stop waiting on the sidelines, whether you are a buyer or a seller, and make some tough decisions today.  I have heard of just about every scenario good or bad with housing as it relates to money and finances, so nothing you can tell me will surprise me, so please contact me. Some situations are more challenging then others, so let’s work these more complex housing situations together, and let’s have buyer’s and seller’s move on with their lives and not let real estate or their own house hold them back from moving forward.   I am sure everyone today has a lot of unanswered questions based on their own unique situations.

Take Action Now
I would need you to call me and leave a message 763-300-1648, I'd prefer you email me ron@minnesotainvestors.com. If you do call, please don’t hang up, please leave a message.  You could also email me your housing situation, or tell me it by phone, whatever makes you more comfortable.  I usually can tell you within minutes which direction to go, as I have heard almost all situations. I have many associate investors and agents ready to assist you, but it’s important I hear from you.  Do me a favor and be one of the brave ones and take a small step to help others in the overall scheme of things and the housing market.  The real estate market “can” still move forward without banks. You can refer me whomever you may know that needs help. I can help move real estate forward without banks and even with Trillion dollar bailouts, I can keep real estate moving, it's just financing that's tough right now. Everyone needs a place to live. We can sell houses on short sales to 1st time home buyers, cash buyers, or sell to someone with owner financing, either way this can be done with the current lending financial system.

For those that want to buy, finance, or rent to own a house please go here: www.minnesotainvestors.com/propertiesneeded
For those that have a property, to list, sell as a short sale, sell on a contract for deed, or rent please go here: www.minnesotainvestors.com/propertyowners

Now let’s first go over some very common situations and questions that many people are in right now then I'll discuss how we can overcome them:
Ron, I owe too much on my house and I am not behind on payments
Ron, I owe too much on my house and I am behind on payments
Ron, I owe too much on my house, behind on payments, & the house doesn’t show well.
Ron, I don’t have much equity or money to pay an agent’s commission so I can sell
Ron, I have an adjusting ARM, and I will soon be behind on payments
Ron, I want to buy another house, but I can’t seem to sell this house I live in
Ron, my lender told me they won’t modify the loan, or do a short sale for less than I owe
Ron, I live in another state now, and am not near my property
Ron, my credit is terrible, I am losing my house, I don’t know what to do
Ron, I can no longer afford my current loan, it’s only going to adjust and get worse
Ron, my credit is decent, I have some money, but won’t a short sale affect my credit?
Ron, I am in foreclosure, and just filed for bankruptcy, what can I do?
Ron, I just got divorced, and I am losing my house, what do I do?

I have heard most of these scenarios many times.  Did you know national stats say that 40%+++ of all listed homes are with the help of the lender adjusting the balance?
Watch the video here: Over 40% of House Sales are Distress Sales

Did you know national stats show that 25% of those seller's who have sold in the last 12 months have lost money when selling.  These are in the national headlines, you are not alone.
Read that article here: 25% of SOLD's are for a LOSS

Let me answer all of the situations and questions above with one simple paragraph:
All of the problems above are really two problems:
Your first problem is what to do with the property you live in.
The second problem is what do you do for your next property that you want to move into.
   First off, it’s very tough to sell in this market, but that doesn’t mean you can’t sell, you probably just can’t sell for the price you need.  The solution is that we will have our agents talk directly with your 1^st and/or 2^nd lender directly and negotiate with them to get the balance currently owing down low enough so that you can list the house for a much lower price and get the house sold.  This process is referred to as a short sale, and If done correctly we have options to negotiate with the bank to stop any future deficiencies. In addition, a short sale may slightly ding your credit and prevent you from a future loan for at least 2 years, but giving the house back to the bank can stop you from purchasing with a loan in the future up to 7 years in some cases, so always go with the short sale.  I have associate agents to help with the short sale process. It doesn’t matter to me if your house is in bad shape, or good shape.  Most likely your house will eventually sell, it just needs to sell at a lower price. It's this reason why we need to do a short sale with your current lender(s).  If you have made the decision to not make future payments and you have decided to save up your payments to buy that next house on a contract for deed. We both know that in this current situation that you have bad credit. With a contract for deed, please keep in mind that 5-10% down will work for a contract for deed much better than a few thousand dollars. If you have only a few thousands dollars you should rent or do a rent to own, and just go online to rentals.com   I would suggest that anyone that is not yet behind on payments, but owes too much on their house, should work on getting the property rented, or sold on a contract for deed, so that you can offset your payment amount, so the lender is more flexible when you buy your next property. Do not ever go behind on payments if you don't have to, just so that you can do a short sale. Let's discuss the timing of the move before you decide to do a short sale.  If you feel stuck and have a house you live in, let’s work on that transaction and coordinate it with your next purchase. Either way let's get some money saved up for that next property for moving costs, and deposits, etc  Please contact me and we can start working on your situation.  In the case where you are beyond the sheriff sale already taking place we will have limited time for negotiating and marketing the short sale. This may still be ok if we catch it early enough, but less than 90 days left in the redemption period is probably not enough time.  Bankruptcies taking place before the sheriff sale will slow the process down just a little.  When you want to look at a house, or sell, please let me know upfront that you aren’t already working with an agent.  If you are looking to buy please tell me if you are already pre-approved.  If you aren’t yet pre-approved we have a loan officer who can talk to you about how much house you can afford and get you pre-approved right away.  To get pre-approved I would recommend at least a 580+ credit score, no foreclosures in the past 3 years, no bankruptcies in the past 2years, and for your monthly bills to be close to 1/3 of  your gross monthly income or preferrably less. Based on many houses pricing back to 2002-2003 pricing, I would like to help those focus on short sales at this time.

The definition of a Real Estate Short Sale is: A lender’s agreement to accept less than is owed (short payoff), as an alternative to foreclosure.

A message to all of my readers, I am going to try to keep updating this article over a period of time as I learn new ideas and information to help homeowners, investors, buyers, and anyone related to real estate with this popular subject. Let me now get into some short sale information and see if I can help answer a lot of the questions about the process and how shortsales work in Minnesota, let’s go over why a lender would even do a short sale.

Why Would a Bank do a Short Sale?
Banks are not in the real estate business and what I mean by that is the banks do not want your house back through the foreclosure process, they don’t want to own the property, they want to only lend money. Banks are in the lending and interest business. The reason a bank is willing to do a short sale is that the entire foreclosure process in addition to other costs can equal $50,000+ easily by the time the bank sells the house they get back through foreclosure. The lender offering the property for less than the underlying debt, or anything under $50,000 discount could be worth it to them. For example, let’s say a home owner owes $200,000 on a house and it’s now worth only $175,000 and the seller found a buyer for the $175,000. In this scenario, there is $200,000 owing on the property, so therefore it would take a “short payoff” on the banks part, just to get the deal done. Sometimes lenders will even count the loan as paid in full even with the discounted difference, but not always, it’s a negotiable item. The Four parties that are involved in a short sale are:
1. The owner of the property that is being foreclosed upon
2. A buyer that is interested in the property; maybe an investor seeking a discount
3. The third party that is servicing the loan, the lender itself, or a servicing company
(Conventional, FHA, VA, Freddie Mac, Fannie Mae, etc.)
4. PMI- Private Mortgage Insurance company with the lender

What is the Timeline for Foreclosures in Minnesota?
Here is a diagram: http://mnrealtor.com/consumer/ForeclosureProcess.pdf

Let’s first go over the original loan that the buyer (borrower) at the time received when they initially purchased the property at the closing table. During the initial loan process, the 2 items the buyer signed at the actual closing with the title company were:

1: The Promissory Note: This document does outline the terms of the agreement made between the buyer and the lending bank. By signing this document, The borrower promises to repay the bank the debt. Promissory notes will almost always include a default provision that would enable the bank to charge the buyer for any late payments along the way.

2: The Mortgage: After the promissory note is signed, the borrower then gives the bank a mortgage and he/she(buyer) becomes the mortgagor and the bank becomes the mortgagee. This mortgage document will contain the following provisions:

• Acceleration Clause upon default: this provision would give the lender the right to seize the property if the borrower were not to honor the terms of the promissory note. This right, that the borrower has, would end as soon as the borrower cures the default by catching up on any delinquent amount in the arrears, if the buyer refinances, or if the buyer sells the property and pays off the loan.
  
• Due On Sale Clause: this provision would give the bank the right to call the loan due upon the transfer or (conveyance) in the property. The lender does have the right to do this per the provision in writing, but doesn’t always enforce it.
  
• Mortgage Covenants: these covenants known as rules or (promises) force the borrower to do certain things such as: make sure the property is insured and keep the property in good repair, pay property taxes, essentially it’s in there to protect the lender.

What then is considered default status?

The mortgagor is required to make the agreed upon payments on a monthly basis; however, a typical real estate mortgage would include terms requiring the mortgagor (borrower) to do more than just make the agreed upon payments. Such as, the mortgagor is required to maintain property insurance on the property, pay all real estate taxes that become due, and maintain the property for the benefit of the mortgagor and the mortgagee (lender) which was just stated above. In addition, the mortgage may include a provision that would prohibit the sale of all or of any portion of the property without the prior written consent of the mortgagee. These provision, as mentioned above, would be the due on sale clause. If the mortgagor would fail to abide by any of the terms in the mortgage, he or she (by definition) is in default status. Most real estate mortgages would have a “Power of Sale Clause” that would give the mortgagee the ability to legally take possession of the property.

Under Minnesota law, there are two methods of foreclosing a real estate mortgage:

Foreclosure by Advertisement (Non Judicial) (most common method)

To initiate a foreclosure by advertisement in Minnesota, the creditor(lender) would need to prepare what is referred to as a “Notice of Mortgage Foreclosure Sale”. This notice must specify in writing, the name of the mortgagor, the mortgagee, as well as the original principal amount that is secured by the mortgage, the date the mortgage was originated, the amount the lender claims to be due on the mortgage including taxes paid by the mortgagee, when and where the mortgage was recorded, a description of the mortgaged property, the time and place the sale will take place, and the time that will be allowed by Minnesota law for redemption by the mortgagor. When this notice has been prepared by the creditor, it must be published in a “qualified” newspaper in the same county in which the foreclosing property is located for a period of at least six weeks prior to the sheriff sale. After the foreclosure notice has been prepared and the publication (advertisement) has now begun. The debtor may have the right to reinstate the mortgage. This right the borrower(debtor) has to reinstate is. to be guaranteed by actual Minnesota law even though the creditor/lender may have already accelerated the balance due under the mortgage prior to the initiation of foreclosure proceedings. For the borrower to reinstate the mortgage, the borrower must pay to the mortgagee the amount of the default at the time the mortgage foreclosure proceedings were first initiated plus all accrued costs of foreclosure up to the date of reinstatement, this would include half of any attorney’s fees allowed by law or $150, whichever is greater. If the borrower were to reinstates the mortgage that they are behind on, the foreclosure proceeding would stop at that point, but to reinstate the mortgage, the required back payments in arrears must be paid prior to the sheriff’s sale taking place. I wouldn’t recommend waiting until the last minute on this.

2) Foreclosure by Action (Judicial) (Very rare method in Minnesota)

To initiate a foreclosure by action in Minnesota, a summons and complaint would need to be served according to the “Minnesota Rules of Civil Procedure”. The complaint would name as it’s defendants, all current owners of the property, any other lien holders, and those with any right to possession of all or even a portion of the premises. If no party were to defend the action, then the mortgagee may obtain from the court that it be deemed a valid mortgage. If any of the defendants object, a trial may be necessary to establish the right of the mortgagee to whom will foreclose. Once the court has made its decision, the sheriff would then publish a notice of sale for a six-week period of time.

If the debtor (borrower) is a resident of the county in which the mortgaged property is located, a copy of this judgment of the court and in addition the sheriff’s notice of sale must be served to the the one in debt (borrower). After serving the notice of sale on this debtor, the sheriff must post the notice of sale for the six weeks. At the sheriff sale, the sheriff may sell the property only to cash bidders, except for the mortgagee, which can bid (pledge) its total mortgage and debt. Following this sheriff sale, the sheriff would report the sale to the court, which would then confirm the sale.

Once the court has confirmed this sale, at that point the statutory period of redemption for the debtor would then begin. The time periods for redemption of a foreclosure in Minnesota are the same as for foreclosure by Advertisement. Under either method of foreclosure in Minnesota, any junior lien holders may redeem at the foreclosure sale if the mortgagor fails to redeem. These junior lien holders may redeem if, before the expiration of the mortgagor’s redemption period, they have filed for record, a “notice of intention to redeem”.

The junior lien holders are each given a period of five days within which to redeem the property, and this is based on the priority of their claims or liens on the property (the recorded order) in most all cases, against the property. If the amount that is realized at the sale turns out to be less than the amount due on the underlying debt, the creditor may then be able to obtain a deficiency judgment against the mortgagor, but if the statutory redemption period is six months (very standard) a deficiency judgment can be obtained against the mortgagor “only” if foreclosure was by action. No deficiency judgment can be obtained against a mortgagor, if the “redemption period is six months”, and “foreclosure was by advertisement”. If the redemption period is twelve months, a deficiency judgment could be sought after the borrower.

The Redemption Period:
The redemption period is the time immediately following the Sheriff Sale. During the redemption period the mortgage on the home is no longer valid and the lender will not accept anything, but full payment of the loan. This leaves the homeowner with two options at this point: either sell the property or refinance the property. The mortgagor must redeem within six months of the date of the sale unless one or more of the following did apply, in which case the redemption period can be up to twelve months:

-The mortgage was executed prior to July 1, 1967. • The amount claimed due and owing as of the date of the notice of foreclosure sale is less than 66-2/3 percent of the original principal amount secured by the mortgage. • The mortgage was executed prior to July 1, 1987, and the mortgaged property, as of the date of the execution of the mortgage, exceeded ten acres in size.

-The mortgage was executed prior to August 1, 1994, and the mortgaged property, as of the date of the execution of the mortgage, exceeded ten acres but did not exceed 40 acres in size and was in agricultural use as defined by Minnesota statute. • The mortgaged property, as of the date of the execution of the mortgage, exceeded 40 acres in size. • The mortgage was executed on or after August 1, 1994, and the mortgaged property, as of the date of the execution of the mortgage, exceeded ten acres but did not exceed 40 acres in size and was in agricultural use, as defined by Minnesota statute.

What is the Authorization to Release Form?
View this Authorization to Release info form
This form would be 1 of many items in the Short Sale to Package.

Here is an example of the language you would see in a Authorization to Release info:

Borrower/Owner:
Social Security Number:
Property Address:
I/We hereby authorize______________________
and it’s agents to obtain any and all information with respect to the following items: 1. Any and all information on my existing loan, including but not limited to:
My mortgage loan with (Lender)_______________________________
Under Loan Number:________________________________________
2. Any and all information on any existing liens against the above named property, including but not limited to information for any lien holder/and or their attorneys
3. This document may be reproduced by the individual or company to obtain information from multiple sources as needed
Please provide________________________________________
with any and all information requested on our behalf
{Borrower’s Signatures}
{Co-Borrower’s Signatures}

How Does a Short Sale Hurt or Affect Your Credit Score or Report?
This is a very common question asked all the time as far as what effect it will have, how a short sale on your record will affect your credit score and credit report. A short sale in general will affect your credit report less than a full foreclosure or deed in lieu of foreclosure. You can have a “settlement paid in full” negotiated with the lender, and obviously this will show better than simply doing nothing. No one may know exactly to perfection what the difference is in points on how your credit score would be affected whether you do a short sale vs. a foreclosure. If you are behind in payments and you owe too much on the house, what choices do you really have anyways, you are over financed. If you have lots of money, assets, reserves, and a high net worth and you just don’t feel like making payments or feel like paying down your principle balance, your lender won’t want to do a short sale. They will first want to get financial info from you, and a written hardship letter. This will make it quite clear to the bank that your only option is some help from the lender. This is where you see a seller that has a property listed on the MLS reading as “subject to bank approval”. A full foreclosure can stay on your credit for up to 7 years. I recently heard that Freddie Mac was trying to pass some new laws for their company that would not allow some borrowers to finance a home for up to 5 years through them. This was more in the cases where people were just walking away, and didn’t have a true hardship case. Currently you can get a FHA loan where your last foreclosure was only 3 years ago. That’s how it is in the current market. You can always just go buy on a contract for deed, get into a rent to own, or rent a property while you are improving your credit. As a general rule you can still get loans with 30 day late payment on your record, it becomes less likely with a 60 day late, and very hard with 90 day late mortgage payment, etc. Also in today’s market you can get a lender and the loss mitigation department to agree to a short sale without being behind on payments. In the recent past you had to be behind up to 90 days. It’s slowly been easier and easier as the lenders want to solve this currently large problem with foreclosures. You will probably have many questions about credit, credit repair, bankruptcy, and how all of this affects you and works together, the guy you will want to talk to locally is: Todd Rooker 763-383-0959, he is the owner of Armor Financial Services Credit and Debt Specialists. He is good to talk to about credit repair, financial planning, and he can even refer you to a specialized bankruptcy attorney that understands short sales and a tax specialist on how the “short payoff”, 1099, or deficiency judgment could affect you as it relates to your taxes. There are situations where you, as the seller, are “insolvent” as the definition put forth by the IRS. Please consult a tax advisor on this. You should check out the new Fannie Mae guidelines for foreclosures and short sales. 

How Does Bankruptcy and Short Sale Work Together
I am going to refer this over to Todd Rooker 763-383-0959 a specialist mentioned above with credit repair knowledge, Todd can refer you to an attorney that specializes and understands the affect of bankruptcy and the foreclosure process. As a general rule a bankruptcy doesn’t stop a foreclosure, and in some cases it can only slow it down. Situations where a bankruptcy is done before the sheriff sale could slow down, or postpone the sheriff sale, whereas if it happens during the redemption period it would just take place within that redemption window, so my understanding is that before the sheriff sale would be where you are slowing it down. Being in foreclosure prior to the sheriff sale and prior to the foreclosure being filed by the bank would be considered a pre-foreclosure. Also the lender must file a motion asking for the foreclosure to proceed. I would highly suggest that you go over this with a bankruptcy attorney who does this every day for a living. You will be getting a letter known as an “Affidavit of Abandonment for Real Estate & Asset”.

How Do I Buy a Short Sale?
As a buyer you want to know what is in mn for sale and when you find out you’ll ask how to make an offer to buy a short sale house? When buying a short sale home it’s recommended you work with a buyer’s agent or a listing agent that is working with the 3^rd party short sale negotiator, or directly talking with the loss mitigation department at the bank. They will be able to update you on what’s going on. You are probably wondering where to find them. Typically you are looking for an agent that is listing houses on the MLS stating in the agent remarks such as “subject to bank approval”, “subject to a short sale”, this is a “lender mediated transaction”, “subject to 3^rd party approval”. These are the types of phrases you are looking for. This agent could likely be in the business of negotiating short sales all of the time. When you call them just tell them you are a buyer looking for some help. After you look at some of the available properties they have on their short sale list. After you find the right property you like just like any other transaction, you will have the agent write up a short sale offer that will get submitted to the bank.

How Do I Work With a Short Sale Real Estate Agent
There are REALTORS® that do specialize in short sales and foreclosures. That is the type of real estate agent you should work with. They are going to understand the paperwork, the short sale process and all of the timelines that are involved. The agent will meet with the homeowner and they will go over the paperwork, have you sign it, collect it and get it into the negotiator, so that they can submit it with the package to the lender. The agent could put a sign in the yard if the seller agrees as well as get the property listed, and start getting showings on the property, make phone calls, return phone calls. The listing agent can review purchase agreements, write up purchase agreements, sometimes can even work with the buyer’s also. The listing agent works very hard along the way to keep the homeowner informed throughout the entire process.

How Do I Get Additional Short Sale Classes and Training?

One of my favorite training classes I have taken is a Saturday class based on the program Secrets of the Short Sale created by Steve Dillon also presented by Curtis Brooks. This is a short sale course that these two came up with that they spent a lot of time and research on from their experiences, and someday I hope to check it out myself. There is a popular course out there by Tom Butler called Short Sale Magic. I see it advertised online everywhere. Either of these programs are perfect for those investors that want to get into the business and start there own short sale company. It’s important that you learn the proper requirements and procedures in the business, proper forms, laws, tips and how to properly service your clients after you have sent in the initial short sale full packet. Please remember when listing your properties for sale to put in the “agent remarks” online that the sale is “subject to a short sale”, so that the buyers know it’s not a conforming traditional sale. One of the things you will get from the many training books and classes out there is how to really be an expert at how to do negotiations with the bank and their loss mitigation department. Soon after doing many transaction and calls in which you have spoken to this department at the bank, after enough times you will be known as the loss mitigation specialist! When you first meet with your seller(clients) you will be collecting a lot of their personal information (this is listed at the bottom of this article) and after you gain all of this info and decide that you can move forward with their situation, you will be getting some contracts signed for the short sale. One of the many items you will need from the seller is what’s referred to as a “hardship letter”. This is best presented to the bank if it’s hand written by the seller describing their current situation and why they are not able to make the payments in the coming future. This will be one of many items in your package that you will send into the lender before you would get an approval later on. Your goal would be to eventually build up a lot of referrals and leads and create a very efficient short sale system.

How Does a Short Sale Affect Me With Taxes?
Being that I am not a tax advisor I will not get into this question and topic too deeply, and also I have attached numerous great articles from the IRS, and attorney’s below for further reading about short sale taxes and the 1099 the homeowner could receive in the future. We will want to make sure that the short sale expert negotiator does his/her best to help you out. I have listened to many experts and been to many short sale seminar and training, and they all seem to have a different view, or at the very least explain it in a different way. As a general rule in Minnesota, when you go through the foreclosure process, that lender who does go through a standard 6 month redemption by the way of advertisement has in effect relinquished their rights at coming after the borrower for a deficiency judgment on the short sale. However, you are looking to sell the property for less than what is owing before it would go back to the bank. Therefore with this situation, when the short sale negotiator talks to the bank they will need to get a letter approved by the lender to waive any future deficiency judgment against the seller and consider it a “full settlement paid in full”. Please keep in mind that lenders can still come after anyone that signed on the original promissory note that guaranteed and signed this note. In addition the other lien positions didn’t initiate the foreclosure, so they still have the right to come after the seller for a deficiency judgment. Also many lenders will do what’s called a “partial release” where they detach the lien (mortgage) from the property so that the property can be sold and clear title can be passed to the next buyer. Depending on the negotiations with the lender, this promissory note can become a judgment and the lender can later come after the homeowner for that amount they guaranteed. Also please keep in mind if you sell it on a short sale, or the bank ends up with it back, eventually their will be a “loss” showing to the lender of which the lender will take that difference (amount owing – amount sold for) and even if they don’t’ come after you for a deficiency judgment they can always pass that information onto the IRS, and at the timing and choice of the lender can 1099 the homeowner possibly 1, 2, or 3 years later when it would make sense for the IRS, to show it as a loss on their tax records for that year. This part of the transaction can get pretty complicated, so I think you should seek advice of a tax advisor, I would also recommend you talk to Todd Rooker on this as well as he can put you in touch with the right tax advisor.

How to Find My Next Property Now That I Have Bad Credit?
Now that you feel that you have bad credit currently or know that you soon will have bad credit, you need to plan on your next property that you will live in. You will want to consider the fact that the foreclosure process in Minnesota is long, and during negotiations with the bank it takes some time, so you will have to make a decision if you are able to make future payments, if you are going to save that money up, or what you decide to do. Currently I can recommend our site here: http://www.minnesotainvestors.com/propertyneeded/ where you can choose between renting, rent to own, contract for deed, etc. All of them allow for bad credit and previous foreclosures, bankruptcy, etc in almost all cases. The more money you have to put down, the more rights you’ll have on the home, and the closer to ownership you’ll be. Check this site for updates, and as of right now, for only 6% down you can buy and own a house on a contract for deed, allowing yourself a few years to get your credit better and qualify for a home in the future. There are plenty of properties out there for those even with not so great credit, so please don’t worry about that, there are plenty of vacant properties.

CONCLUSION:
Let me first say that I always appreciate the opportunity to educate everyone on the short sale and foreclosure process here in Minnesota, and how I can answer everyone’s questions in this article. Let me say I am a real estate agent and broker and I am not an attorney and not a tax advisor, so I please ask everyone to seek guidance in regards to those topics as there are many foreclosure laws as well as many important tax consequences to consider when doing a short sale. Please see my disclaimer at the bottom of this page. I also would like to add that I am more than happy to talk to homeowners that decide to get help to do the short sale procedure. In addition, also short sale and foreclosure agents that want to refer their leads for negotiating a short sale. I will only be able to take leads for the state of Minnesota for right now, possibly on the border of Wisconsin. I welcome all leads of yours. Please read below as I let you know which questions I will need the answers to. You may fax the answers to these questions to 763-390-0011, you may email the answers to ron@minnesotainvestors.com, or I can email you a form and you can fill it out, which could save us all some time. Before working with myself or a short sale agent please read Minnesota’s agency disclosure.

LEAD INFO NEEDED FROM SELLER FOR SHORT SALE:
Property Title Info:
Currently Single?
Divorced?
Divorced When?

Borrower Info:
First Name:
Last Name:
Home Phone:
Cell Phone:
Best Time to Call:
Email:
Fax:

Co-Borrower Info:
First Name:
Last Name:
Home Phone:
Cell Phone:
Best Time to Call:
Email:
Fax:

1^st Lender Info:
Lender Name:
Amount Owing:
Monthly Payment:
Payments Behind:
Reinstatement Amount:
Type of Loan: Conventional, FHA,VA
Do you pay PMI:
Account #:

2^nd Lender Info:
Lender Name:
Amount Owing:
Monthly Payment:
Payments Behind:
Reinstatement Amount:
Type of Loan: Conventional, FHA,VA
Do you pay PMI:
Account #:

Property Info:
Are you working with a real estate agent currently? MLS#?
Address: City: Zip: County:
Bed: Bath: Garage Stalls:
Property Style Type: Multi-Unit? Sq Ft? Year Built?
Estimated Market Value:
Does it need repairs: Estimated $:
List of repairs needed:
Sheriff Sale Date:
End of Redemption Date:
Is the property currently occupied or vacant?
Have you had a bankruptcy? Date When? Date Discharged: Chapter 7? Chapter 13?
Other liens on the property? Any judgments? Past due water bills? Past Due Taxes?

Short Sale Documents that we will need soon from the homeowner are:
1. Signed Authorization to Release form
2. Tax returns for the last 2 years (1040)
3. Pay stubs from last 2 months (+spouse)
4. Bank statements last 3 months+ (joint accounts)
5. Recent mortgage statements for all properties
6. Hardship letter (handwritten)
7. Financial form will be provided
8. P&L statement for Self Employed and Properties

Related Short Sale and Tax Articles:
Taxation of Forgiven Debt: The 1099C & You written Feb 24, 2006

Excerpts from IRS publications 544 and 507 Regarding Form 1099-C

Seller’s Legal and Tax Liability in Short Sales April 22, 2008

H.R. 3648 The Mortgage Forgiveness Debt Relief Act of 2007
Questions and Answers on Home Foreclosure and Debt Cancellation

The Taxpayer Relief Act of 1997
IRS Sales and Other Dispositions of Assets
IRS Section 1082 Basis Adjustment Reduction of Tax Attributes Due to Discharge of Indebtedness
IRS 1099-A
IRS 1099-C
IRS 1099 A & C

Disclaimer: MinnesotaInvestors.com, Inc. is a licensed Minnesota real estate broker. Minnesotainvestors.com, Inc. handles the marketing end of short sales, provides education and answers questions. Our affiliate short sale specialist will later assist you. The information on this page and the website are for information and educational purposes ONLY and cannot be deemed as legal or tax advice. Please consult your attorney for any legal advice regarding your foreclosure process, your CPA and/or account for tax related questions.

-Due to complex lending standards, complex negotiating, and fuel prices, my associate agents would ask that you do most of your research online of the properties that you want to live in, then ask for a showing of a property.  The buyer's agents will likely want to show less than 10 properties before writing up a purchase agreement.  If you want to be someone that looks at 20-50 properties and just write extremely low offers, due to the time involved, I would insist dealing with the listing agents or simply trying another buyer's agent.  We are happy to have an associate agent help you if you have 10 houses or less to look at before you purchase.  Most housing is priced down to where it should be, pretty close, coming in with a lower offer than listed is perfectly fine with us, or if you are buying a short sale, you can certainly write in a lower offer, just within reason or at least be upfront with the agent you are going to work with.

-You will need to be open with your financial info, from money, to bank info, tax info, etc. so that we can get you pre-approved with a loan. We will need your participation to keep the loan moving forward by getting these items upfront.

-As far as communication you should be at least reachable by cell phone, email, home phone, or text message.  If you take 2-3 days to return phone calls or emails, it will be hard to get anything done due to the market already being slower.  We really need persistent communication from whomever we work with. We would truly appreciate this on your part. We know everyone works full time and not everyone has a fax machine, just if you can return calls and be available for easy communication.

-We only want to work with someone that isn't under contract with an agent currently. Also if you are or aren't pre-approved please let us know we have someone to help get you pre-approved.  We need someone pre-approved before we show properties.  If you have cash to purchase than no pre-approval is needed.

CALCULATOR