Great Hawaiian Homes
The number of Short Sales in Hawaii greatly increased from the first half of 2007 especially on Oahu. There were a great deal of Short Sale Listings in our MLS as more and more homeowners had found that they would not be able to get as much for their homes as they paid for them.
Some homeowners bought their homes in the last couple of years when, or close to when, Real Estate prices were at their highest levels. Other homeowners had accumulated a great deal of equity in their homes and took out second mortgages or simply refinanced their homes for more than they paid for them, with the same result, they were not able to get as much as they owed for the property in a sale price. This may or may not have been a problem. If they had to move right then or could no longer afford the payment of the home, the loss of the home's value was a big problem.
If the homeowner was happy in the home and was not in financial distress, the loss in value was only a loss on paper and the homeowner may come to enjoy lower property taxes.
The State of Hawaii has passed a law called Act 137. This act was put in place to protect homeowners from those that would take advantage of them by committing Mortgage Fraud. Act 137 clearly defines what a Distressed Property is and the obligations of any Real Estate Professional that is going to help homeowner of a Distressed Property sell their home.
The term “Short Sale” is used to describe a sale where: (1) the liens against a property combined with the associated costs will exceed the purchase price of the property and (2) the Seller will be asking the lien holder for a release of the lien on the subject property without a complete payoff. (A property in a short sale might not be a Distressed Property.)
Simply put, a Short Sale is when a home is offered for sale and the expected sale price is less than what is owed for the property. You might be asking, "then what happens?". Very often, a bank will actually "Forgive" the difference between the Sales Price or Sale Proceeds and what was actually owed for the property. They do this because Foreclosure is very expensive for the bank and can actually tie up the property for a long period of time. In a Short Sale, the homeowner is basically saying, "I'm in trouble and I want to work with you to help you get some of your money back" to the bank or lender.
One of the problems with Short Sales across the country, as well as here in Hawaii, is that every bank has their own set of procedures and requirements to approve the Short Sale. Another problem is that the Short Sale Departments of many banks are so overwhelmed by the sheer number Short Sale Transactions they are dealing with, they are becoming unorganized and unable to function. This accounts for the amount of time these transactions take to set up and close, 60 to 90 days or more. We have actually seen banks start foreclosure proceedings at the same time they are working through the Short Sale Process with an accepted offer! (Different departments in the same bank...) When this has happened in the past, we simply let our contact with the Lender know what is going on and they put off the foreclosure.
The term “Distressed Property” is defined by Hawaii’s Mortgage Rescue Fraud Prevention Act (“the Act”) as follows:
Any residential real property that:
(1) Is in foreclosure or at risk of foreclosure because payment of any loan that is secured by the residential real property is more than sixty days delinquent;
(2) Had a lien or encumbrance charged against it because of nonpayment of any taxes, lease assessments, association fees, or maintenance fees;
(3) Is at risk of having a lien or encumbrance charged against it because the payments of any taxes, lease assessments, association fees, or maintenance fees are more than ninety days delinquent;
(4) Secures a loan for which a notice of default has been given; or
(5) Secures a loan that has been accelerated.
The term “Distressed Property Consultant” is defined by the Act as follows:
Any person who performs or makes any solicitation, representation, or offer to perform any of the following relating to a Distressed Property:
(1) Stop or postpone the foreclosure sale or loss of any Distressed Property due to the nonpayment of any loan that is secured by the Distressed Property;
(2) Stop or postpone the charging of any lien or encumbrance against any Distressed Property or eliminate any lien or encumbrance charged against any Distressed Property for the nonpayment of any taxes, lease assessments, association fees, or maintenance fees;
(3) Obtain any forbearance from any beneficiary or mortgagee, or relief with respect to a tax sale of the property;
(4) Assist the owner to exercise any cure of default arising under Hawaii law;
(5) Obtain any extension of the period within which the owner may reinstate the owner’s rights with respect to the property;
(6) Obtain any waiver of an acceleration clause contained in any promissory note or contract secured by a mortgage on a Distressed Property or contained in the mortgage;
(7) Assist the owner in foreclosure, loan default, or post-tax sale redemption period to obtain a loan or advance of funds;
(8) Avoid or ameliorate the impairment of the owner’s credit resulting from the recording or filing of a notice of default or the conduct of a foreclosure sale or tax sale; or
(9) Save the owner’s residence from foreclosure or loss of home due to nonpayment of taxes.
The term “Distressed Property Conveyance” is defined by the Act as follows:
The transfer of any interest in a Distressed Property effected directly or indirectly by or through a Distressed Property Consultant.
The term “Distressed Property Conveyance Contract” is defined by the Act as follows:
Any agreement or obligation affecting a Distressed Property Conveyance.
The term “Distressed Property Purchaser” is defined by the Act as follows:
Any person who acquires any interest in a Distressed Property directly or indirectly through a Distressed Property Conveyance or Distressed Property Conveyance Contract.
If you are a homeowner and need to sell your home now and can’t wait for the market to change so you will be able to cover what is owed, you will fall within the short sale category. Unless, you are fortunate enough to be able to pay the difference that is owed after the sale, you may choose to deal with your lender yourself, rather than asking a Licensed Realtor to step in and assist you or hiring an Attorney or Distressed Property Consultant.
Some homeowners prefer to pay the difference because they do not want their credit ratings to be affected. For those unable to pay the difference or a professional, there are steps you should take immediately.
1. Call a Licensed Real Estate Agent for help to weigh your options. Gayle and I sincerely hope you will call us at (808) 630-1828 or (808) 388-1485.
2. Call your lender and let them know that you will need to request a loan modification or short sale approval. Your Lender will ask for specific documentation and you will need to get these to them in order for them to review your request and grant it.
3. If you had 100% financing you probably have a 2nd mortgage, or if you have a Home Equity Line, you will need to contact the lender and ask what their procedures are for a short sale and what documents they need in order to consider granting your request. Please be aware that having a second mortgage will most likely cause delays in moving forward with a short sale. If you are lucky enough to have both loans with the same company you will be much luckier in moving forward.
4. Contact a Realtor who is familiar with Short Sales and Act 137. They will be best able to help you with the process.
Once you have a hired a Realtor, submitted the documents requested by your lender and received approval to move forward with the short sale, your Realtor will aggressively try to sell your property for you. Once a contract is accepted by your mortgage company the transaction will move forward like any other, with exception to documents at closing being forwarded to your mortgage company along with all proceeds. Occasionally at closing you will be required to pay a sum. This varies depending on your situation.
We would love to speak with you and offer any help we can. We will always give you straight answers and work to protect your best interest at all times. When you pick a Realtor, we hope you will pick us.
Contact Mike & Gayle at:
(808) 630-1828 to reach Mike or (808) 388-1485 to reach Gayle
Toll Free Fax: 1-866-885-4510
Email: Mike@GreatHawaiianHomes.com email@example.com