Investors who bought homes at a much higher market value were not able to break even every month. They lost money on mortgage, sewer, trash and monthly HOA dues. When the real estate market busted in 2007, the layoffs started and many of their tenants were not collecting enough unemployment benefits to keep paying rent. As a result, investors were left with a high percentage of vacancy, no tenant paying any rent. With no rent money coming in, no equity to refinance the rental property down to a lower interest rate, many commercial and residential investors were forced to short sale and/or foreclose. I once took four rental listings from one investor. This investor bought four one-bedroom condos in Reno for $105,000. It eventually sold for $35,000 only three years later. The rent he collected was not enough to cover mortgage. The monthly HOA dues was $271 – Yes, per month for each of his four condos!
Well, good news for investors are finally here! Under the new guidelines, which take effect June 1, 2012. Investors can now short sale and be forgiven on their mortgage debt by their mortgage servicer. This mortgage debt has been available to primary homeowners only up until June 1, 2012.
Under this new HAFA guideline, homeowners and investors can also choose to stay current on their mortgage payments. Why? Because when you are late on your mortgage payments, you will be reported negatively to the three credit bureaus. Sometimes, homeowners/investors who have other credit debts may not want their credit damaged so they can avoid having other creditors raise their interest rates.
Under this new HAFA guideline, an investor who is experiencing true financial hardship can now short sale their investment property(s) and receive 100% Debt Forgiveness. That is a huge benefit for investors that own many properties that are doing badly in this economy. It is crucial that the investor call their mortgage servicer to ask for the HAFA qualification and guidelines in advance, as every servicer have their internal guidelines for different loan types. HAFA is a government designed program to bail out homeowners who is experiencing financial hardship, it was established in April 2010. HAFA also requires the homeowner to get the property listed by a licensed realtor. However, before a property is listed, the realtor is not authorized to speak to the mortgage servicer to get the HAFA qualification information; therefore the homeowner/investor will have to investigate and collect all the guideline information.
What are the major benefits of the HAFA short sale for investor? Investor can choose to stay current on the mortgage payment, or the investor can choose to stop making payment all together. Why would an investor want to keep throwing money away at a home he will not own? Some investors do have other properties that have equity and they may choose to refinance them in the future. So choosing to stay current will save further damages on his credit report. Most banks that participate in the HAFA short sale program will also offer a move-out incentive for investor owners. Seller incentive is paid to the seller at the close of escrow for cooperation of the short sale, maintaining the property.
Good news for homeowners and investors: Time to take advantage of the equal opportunity HAFA short sale and receive 100% and some money. Go ahead and get the word out to all the other investors. Get out of your bad loan now!
Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is www.anniechristian.com.