Short Sales touted as new solution - Watch Out!

Short Sales! Many people in debt work tirelessly to create a short sale. 7 of 10 never close, says Florida Real Estate Attorney Michael Hirsch.

Even CNN today hopped on the bandwagon of so called "Short Sales" as the new answer to the mortgage foreclosure and debt crisis. Clark Howard reported this morning that Banks are now looking to streamline the process and approvals for short sales. That's good for the consumer, right?

Wrong.

Very wrong.

It is important to understand the public perception of what a "short sale" actually is. People in financial trouble have an even scarier notion. The popular understanding in the public is that a short sale is:

1. the sale of real estate
2. at fair market value
3. by the Owner
4. with permission from the Bank (mortgage holder)

The problem is the next myth that most of the public and definitely the person in financial trouble tend to believe:

5. that absolves the Owner of any further liability

6. and helps your credit rating

Most people believe if they short sale the property they are free of the debt surrounding the house. Not necessarily. You really have to have a competent attorney read all the paperwork. Most short sales leave you on the hook for the deficiency, that is the balance of the note after the proceeds of the sale is applied to the note.

Another issue is that often the Bank "forgives" the balance, and you receive a for 1099 for the balance of the loan not paid. That means taxes may be due.

Further, the short sale may not affect your credit at all. There is little evidence that the failure to make payments, followed by a sale in which the balance is not paid is any worse than filing bankruptcy.

Short sales are NOT the panacea that everyone is proclaiming. Banks are merely trying to mitigate their up front losses on a sale, but don't be fooled into thinking you are guaranteed to walk away with no further debt or obligation.

Think twice and read the documents 3 times!

And go see a great attorney!

Flordia now leads!

Yes! Florida has the dubious distinction of having the highest foreclosure rates in the country.

In an article from the South Florida Business Journal, the following stats were displayed:


"The survey found that 20.1 percent of mortgages on Florida homes were delinquent or held in foreclosure. Nationwide, more than 11 percent of American homeowners are either delinquent or in foreclosure.
The survey covered 85 percent of the country’s 1-4 family residential mortgages.
In the fourth quarter, 11.1 percent of Florida residential mortgages were past due by at least 30 days – with 4.4 percent past due more than 90 days.
Nationwide, the number of borrowers at least one month behind in their payments – but not in foreclosure – rose to nearly 8 percent during the fourth quarter. That is the highest rate of delinquency ever recorded by the survey, which began in 1972. It reflects a record 13 percent jump compared to the third quarter.
Nearly 9 percent of Florida residential mortgages were held as foreclosure inventory at the end of 2008 – the highest rate in the nation. An additional 2.4 percent of Florida residential mortgages started foreclosure during the fourth quarter.


What does this mean?

Well...think how long the inventories of "dead properties" (properties that are not producing revenue or value for consumers) will stay out of the marketplace. The average foreclosure, sale and sale to the public is well over two years...and that is if the bank can find the notes.

This property value issue is going to drag along as properties will continue to flood the market, exceeding demand (and credit availability) for years to come.

Anyone who is remotely connected to housing and construction is effectively out of work.

The ripple effect will intensify.


Bankrutpcy would allow for a quick adjustment of the valuation of the real estate...just like a stock market correction...but the banks oppose any mention of allowing the bankrutpcy courts to write down equity values...prolonging the death throws.

Unemployment - devistating impact

Unemployment - A hidden danger

Some news that will show the rocks lurking beneath the water.

On Oct. 3, the U.S. Bureau of Labor Statistics' reported that over the past 12 months, the number of unemployed has increased by 2.2 million and the unemployment rate has risen by 1.4 percentage points. Total non-farm payroll employment decreased by 159,000 in September and thus far in 2008, payroll employment has fallen by 760,000.

What is the impact? Unemployed people use their resources to survive (credit cards, etc.), but cut back consumption as much as possible.

Ripple Effect: 70% of the US economy is based upon consumer spending.


Retail will plummet - and all of the manufacturers and suppliers will starve. The economy will slow.


Anecdotal evidence:
There was a 60 Person line at Costco yesterday...people looking for any employment.


These people are easy pray for the fake solution "we will keep you in your house" debt pirates.

More suffering in the future.

Credit Scamers unite!

The next great wave of scams will be "Credit Repair" companies as credit tightens to epic proportions. Everyone under 700 can just pay cash.

Desperate People will pay these fly by night companies anything on unregulated promises. These CyberGypseys(tm) close down shop and move as the States and the FTC move in for the kill.

There was one that asked people for their Bank Routing Number! Can you believe people gave it out. I called one and they were indignant and still in operation in Tampa. The Feds know about them but cant seem to move fast.

They can spend $700B to bail out their buddies but SCREW the common guy suffering.

This from the Jacksonville News:

By DAVID BAUERLEIN, The Times-Union

Although there are reputable businesses that help consumers through the credit repair maze, state and federal agencies say they are fielding thousands of complaints from people who paid businesses to "clean up" their credit reports.

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Last year, the Federal Trade Commission joined eight state law enforcement agencies - including Florida's attorney general - in a crackdown on 20 businesses that claimed they could strike bad marks from credit reports.

The businesses typically charged several hundred dollars in advance and promised to permanently eliminate negative information from credit reports, even if the information was "accurate and timely," according to the FTC. "

Unbelievable! Here we go into the dark ages.

New Parasites

They come, surprisingly, from California. My research team has contacted a number of "mortgage modification" companies that promise to beat your bank into submission for the low, low price of $3,000.00...cash.

When you ask for guarantees you can hear the tires squeal as they put the gears in reverse. One such parasite actually told me "We are an attorney run company." I said "Oh...so you are an attorney?" She replied "Well...no...but we have attorneys." After 10 minutes she confessed she is selling the services from her home and has never actually MET any of the attorneys, nor did she know names other than from her script.

Being an attorney myself, I was shocked that she had no idea that she was giving legal advice. She clearly had a script but departed from it to hype the sale.

Then the come on line. "You know we can check the paper work to see if any mistakes were made. If they were you get to keep your house and you don't owe anything. This happened just the other day with one of our customers. It happens all the time. We don't guarantee it, but it is worth the extra money to try."

Welcome to the debt parasite version of Las Vegas. Spin the wheel and get a house!

And as usual, they would supply no names, no proof, no nothing. They would not send a contract without a commitment - nor would they put the fee in writing without my asking 3 times. Even then they were vague.

So why do people fall for this stuff?

They are desperate, frightened and do not have the legal advice that any company would normally have. They heard about a bail out plan and they think this is somehow linked to it. People make emotional decisions at times of crisis.

Any competent bankruptcy attorney can help someone determine the next steps when facing financial disaster. Our Vigilant attorneys are clear that they honor the original intention for creating law as a profession in the first place: TO BE OF SERVICE.

Next theme...beware of the firms that are in the "business" of bankruptcy.