This is a serious question for many Portland Oregon home owners who are underwater in their mortgages: Should I Short Sale my Home or Try for a Home Loan Modification? For your consideration, I will tell you a common and very sad experience I have regarding folks who try for Portland home loan modifications. Too many times, the bank has suggested that the Portland home owner stop making payments while proceeding with the modification. The modification then takes 6 months to over a year to process. At the end of that time the bank rejects their modification attempt and all of the sudden they get a notice that the bank is going to foreclose in a week or two! These unfortunate people call me, and simply put, there is no time left for the Portland short sale to work. They get foreclosed on, trusting the bank all the way.

The best way to approach a modification, in my opinion, is to keep making your payments. The best way to approach a Portland Short Sale is to start the process as early as possible – before you miss too many payments! I’m VERY successful in making short sales work (over 90% success rate), but I need time, it takes time to make the Portland short sale work. The more current someone is on their mortgage the better chance they will have at a successful short sale. (I have sold a Portland short sale for an owner who was more than a year behind, but that is not the norm.) Should you try for a home loan modification or for a short sale? Try the modification if you are committed to staying in the home – but be careful, and if you are going for a short sale situation, start the process early. That is my best recommendation. (Disclaimer: I’m not a lawyer, and it is always advisable to consult a lawyer.)

Below are some 2011 Portland MLS market statistics:

Foreclosures in Portland: In rough terms, nearly 100% of foreclosure properties in Portland, also known as REOs, sell in a 6 month period. If you are looking to buy or make an offer on a Portland foreclosure, know this: it won’t stick around for long. Banks do not take low ball offers, in general they sell the property site unseen. I have found banks will typically lower the sales price in Portland by 3% every 60 days or so. This means that they will eventually bring the foreclosure to a price that demands the market’s attention and gets the home sold in short order. It is common for a Portland foreclosure to sit for a month or two without any offers and then suddenly after the next price drop (bringing it to “deal” status), multiple offers are received by the bank in short order, and often these competing offers outbid each other so the home sells for more than the previously published price!

Short Sales in Portland: In rough terms, nearly 30% of Portland short sales sell within a 6 month period. Also, 1 out of 5 short sale offers actually succeed. Buying a short sale home in Portland is the hardest way to go about buying a home, but it is not impossible. There are a number of things an informed real estate agent can do to help improve your chances. Since the bank typically deals with one offer at a time, it increases your chances if no other offers have been submitted. If the Portland short sale price is already preapproved by the bank, this also can help to streamline the process – only if you offer exactly what the bank has preapproved. (For those considering selling their home via short sale, I have a 90% sucess rate mostly due to my experience and persistence in working with the banks.)

Traditional Homes Sales in Portland: In rough terms, nearly 50% of traditional home sales in Portland sell within a 6 month period. It is not as easy to buy a Portland home as it was in the past. Many home owners are underwater, bringing money to closing to sell their home, or have limited equity and negotiating room. Just because a property has been on the market for a long time does not mean the Portland homeowner has the equity available to even consider a low ball offer. However, dealing with a Portland homeowner is nearly always easier than dealing with a bank. The process can be much smoother with a greater amount of consideration for both parties. Banks do not play nice, to put it simply. You have to jump through all of their hoops without mercy or the Portland foreclosure or short sale will not succeed.
 

$170,000

(Successful Short Sale)

3 Bedrooms

2.1 Bathrooms

1545 sq. ft.

• $94,400
• Sylvan Heights
• Condo
• (Successful Short Sale)
• 1 Bedroom
• 1 Bathroom
• 812 Sq. Feet

This is a very important question. Many people are afraid of doing a short sale because they are concerned the bank could come after them later for funds.  If you don’t do a short sale correctly, a bank CAN come after you afterwards.  If you do a short sale correctly, a bank CAN’T. I make sure the short sale process goes correctly.

Listen to this important question posed to a real estate lawyer.

Q. I have heard conflicting information regarding the banks’ ability to have a deficiency judgment against the seller of a property in a short sale and the banks’ recourse against that seller/borrower. Will you please clarify and address Oregon Law regarding recourse vs. non-recourse?

A. There is no recourse or non-recourse in the “deficiency judgment” sense in a short sale because there is no judicial foreclosure.  A short sale involves the voluntary modification of a legal debt obligation and therefore can contain any terms the parties want.  Recourse and non-recourse is about the ability to seek a deficiency judgment in a court of law under state foreclosure statutes.  In a voluntary modification (like a short sale) the “deficiency” is the unpaid balance of a note.  A note holder can sue on the unpaid balance of a note unless the maker of the note bargains for and gets “full satisfaction” of the note instead of just the note holder’s agreement to waive their lien and not foreclose.  To get full satisfaction you usually have to ask for it.  Otherwise, the lender can waive their lien, forego foreclosure and continue to hold the note.  With the note comes the right to the unpaid balance as personal debt no longer associated with real property.  The reason you hear conflicting information is that the difference between foreclosing on property and bargaining for modification of a debt witnessed by a note is not well understood.

• $276,000 (Successful Shortsale)
• 4 Bed
• 2.1 Bath
• 2199 sq ft

I’ve been successfully selling short sales for years on both the buyer’s and seller’s side. This designation was awarded to me after I successfully took a number of classes, meet professional experience requirements, and passed the necessary exams with flying colors.

Let me help you get out of that underwater home today. I have all the tools and training necessary.

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Stephen FitzMaurice, Realtor, CSSA.
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Many people are concerned (and rightly so) that they may be taxed for the forgiven amount on their short sale. For those of you who don’t know, this is a short sale. Basically, you owe say 200,000 and the home short sales for 150,000, so on you next tax statement you could be 1099′d for 50,000. This would be a problem for most people!

The good news is that the government has provided relief from this potential tax problem.

You can read all about it on the IRS website: http://www.irs.gov/individuals/article/0,,id=179414,00.html They call it “The Mortgage Forgiveness Debt Relief Act and Debt Cancellation”. At the time of this post, it is still active, but check with the IRS to make sure it is still valid for you today. There are certain (but very simple) restrictions. In simple terms (always consult with your tax preparer), if the home is your primary residence you won’t pay this tax if you file the provided form.

So… In summary: do I have to pay tax on my Short Sale?

No, most people will not have to pay tax.

• 265 NW 181st Avenue
• $134,000 (Successful Shortsale)
• 4 Bed
• 2 Bath
• 1412 sq ft

• 12607 SE 155th Ave.
• $325,000 (Successful Shortsale)
• 4 Beds
• 2 Baths
• 2885 sq ft

• 10334 SW RIDGEVIEW LN
• $318,000 (Successful Shortsale)
• 3 Beds
• 2 Baths
• 2066 sq ft

Today, it is all in the offer.

A Portland short sale price means almost nothing.  The bank will take what it takes and no one knows for sure what that will be, unless the price is pre-approved.  

On the selling side agents set ridiculously low short sale prices to bring in an offer.  Once the first offer is in the bank starts acting, usually by ording a BPO, or broker’s price opinion. Then the bank will negotiate with the first offer at (usually) a much higher price.  Finally, most banks present the selling agent with a pre-approved price (after they do the BPO) and then the home might actually sell.

Buying a short sale home can be a long process, but it helps to have someone with you who knows what to do!  I can tell if a short sale will go fast, take forever, or perhaps not even work at all and end up a foreclosure.