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Robert Armstrong and Cinzia Morelli
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813-569-6294
813-417-3602
cinziamorelli@
casafinarealty.com
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Robert Armstrong and Cinzia Morelli

Real Estate Professionals

Your Short Sale Resource

Homeowners who want to avoid foreclosure, or who wish to sell their home for less than the full payoff amount, should consider a short sale. For the past four years, Cinzia Morelli and Robert Armstrong have helped owners review all their options, such as negotiating a short sale when the net proceeds are not enough to cover the mortgage obligations and closing costs (i.e., property taxes, transfer taxes, and the broker’s commission).

The short sale procedure is complex, but in some cases is the very best option. Robert and Cinzia are certified short sale experts and will guide their clients through every step of the process. If you think you may be close to experiencing a financial hardship and may find yourself in difficulty and unable to make your mortgage payments, or if you are being transferred by your employer and your home is not worth what you paid for it, contact us and we will be happy to explain your options.

Here are some FAQs that may be helpful in making this important decision:
1. What is a short sale?
2. My home has been appraised for less than my mortgage obligation. Will my home qualify as a short sale?
3. How can I find out if my home is eligible for short sale?
4. What does a typical short sale look like?
5. Why are so many homes going into a short sale situation?
6. What are the key issues to consider?
7. How will Cinzia and Robert help me with my short sale?

1. What is a short sale?
A short sale occurs when the sale proceeds of the house are less than what is still owed on the mortgage. The lender then agrees to accept the proceeds and forgive what is still owed on the mortgage when the owner is unable to make the payments.

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2. My home has been appraised for less than my mortgage obligation. Will my home qualify as a short sale?
Just because sellers are behind on their mortgage or are having financial difficulties doesn’t mean that the property is automatically eligible for a short sale.  Sellers facing a financial hardship typically have options prior to losing their home through foreclosure.  For owners behind on their mortgages, the first option is to find a way to catch up their payments.  Borrowing from relatives or asking the lender to refinance the mortgage are among the options.

Many lenders are willing to extend the term of the mortgage, add any delinquent payments to the loan principal or adjust the interest rate.  If the owners’ income has gone up, the lender might agree to a repayment plan with higher monthly payments to make up the deficiency.

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3. How can I find out if my home is eligible for short sale?
To request a short sale, the owners typically present the lender with evidence of financial hardship and a current market estimate of the home’s value.  Any potential sale is contingent on the lender’s approval. 

Lenders will accept a short sale by owners facing financial hardship rather than foreclose for various reasons:
1.  The cost of foreclosure was estimated to be at about $60,000;
2. To avoid increasing the lender’s home inventory, usually called real estate-owned property (REO);
3. The area or neighborhood has depreciated in value;
4. The property is in poor condition.

In today’s economic environment, more lenders than ever before are willing to discuss a short sale.

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4. What does a typical short sale look like?
While there are always many variables to any short sale, an example could be the case of an owner who paid $300,000 for a Florida home in 2005 using a $30,000 down payment.  At present, the owner would have no equity if the current market value was $220,000.  In fact, that owner not only lost his down payment, but the home is worth less than the total mortgage value. 

It’s not just those having trouble making mortgage payments that are affected by today’s market. For example, a couple who purchased their home when the market was high, financed 90% or 100% and found themselves facing a job transfer, could be forced to sell and find themselves owing more than the home is worth.

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5. Why are so many homes going into a short sale situation?

Throughout Florida, the number of sellers facing financial difficulties is clearly on the rise in all price brackets.  Many owners holding adjustable rate mortgages (ARMs) or interest only loans are finding it tough to keep up with today’s higher monthly payments.  Rising foreclosure rates throughout Florida and the rest of the country signal the seriousness of the problem.

At the same time, a decline in sales prices over the past 4 years has left some sellers with little or no equity in their homes, sometimes called an “upside-down” sales situation.

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6. What are the key issues to consider?
There are several key issues to consider when speaking to Sellers about short sales:

Finances -- When discussing a potential listing, we try to assess the sellers’ financial situation.  People normally don’t say “I can’t make the mortgage payment”.  That is why we ask the owners to estimate how much equity there is in the home and we help them with that.

Carrying Costs -- Calculating the carrying costs of the property is important.  We do the math and help the sellers think about six months into the future.  What price would they be
happy about at that point?  If we can price it at the point now and sell it quickly, we can help them avoid the ongoing costs and get out of the property faster.

Processes -- We explain the short sale process in the greatest detail.  It is a challenging process and the negotiations with the lenders take time and a lot of effort and continuous follow up.  It can be frustrating for the owners who are waiting for the process to be over, so we make sure the sellers understand. We keep them informed every step of the way.

The Property Price -- A market analysis has to be done on the property.  The changes in the market have to be explained well to the owners and the property has to be priced aggressively to spark a quick sale and obtain an offer and a contract.

The Contract -- Once a contract is accepted on the property, the negotiations with the lender begin.  Buyers have to be made aware and need to be disclosed to, that the approval of the sale and the contract are subject to the owners’ lender’s approval.  In fact, the lender has the right to approve or disapprove the short sale, the contract price, etc.

Financial Implications -- It is extremely important that the sellers are aware of the financial implications short sale can bring.  We encourage them to contact an attorney, a tax advisor or financial planner for advice on the financial ramifications of the sale relating to debt forgiveness.

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7. How will Cinzia and Robert help me with my short sale?
Being able to explain the pros and cons of the sellers’ options has become crucial in today’s market. Cinzia and Robert work constantly to let people know that they don’t have to walk away from their home, but they have options.  They explain the terms and the process to them in detail.  They ask during their listing presentation what the mortgage balance is so that they can discuss openly the owners’ equity and current market value and assist the Sellers in making the right choices.

Throughout the transaction process, communication is critical. Cinzia and Robert keep all parties informed every step of the way.  It is important to keep the buyers informed and engaged so that they don’t get discouraged and cancel the contract.  But they need to be aware from the beginning that the completion of the short sale process can take 90 days or more.  It is also crucial that all parties are given the proper disclosures and all the paperwork is explained in detail.

Because a short sale involves the Seller’s negotiating with the lender, “these transactions are a lot more work”, say Cinzia and Robert.  “To us, it is worth it.  If we can get someone out of a difficult financial situation, we have a customer for life.  When they buy their next house, they will think of us and refer us to other as well.”

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