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12 Reasons to Hire a Property Manager
Satyam Jagmohan-Primary Broker
If you've owned income property for any length of time, you know that managing a rental can be financially rewarding. And you likely discovered that property management requires a large commitment of time and effort.
While it may make sense to take the do-it-yourself approach if you're a handy person, live close to your property, and don't mind devoting several hours per month to the task, in many cases this just isn't practical---especially if you hope to expand your business. With this in mind, here are some critical tasks a property manager can help you with:
What is a short sale?
A short sale occurs when the net proceeds from the sale of a home are not enough to cover the sellers’ mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner’s commission. The seller is unwilling or unable to cover the difference.
Some — although by no means all — short sellers may also be in default on their mortgage loans and be headed for foreclosure. However, home owners who bought at the top of the market or who took out large amounts of equity with a refinance and who now need to sell because of divorce or job transfer may also find themselves upside down, owing more than the home is currently worth when closing costs are factored in.
How do I know it’s short?
A CMA will be your first indicator, but you also need to know what their outstanding debt is and calculate the cost associated with a sale — from transfer taxes to commission. This will give you an estimate of the net proceeds that will be realized,
on a net sheet. This information can then be entered into a HUD-1
Settlement Statement to calculate out the final, negative result at
Ask your Realtor at Khemson Realty to check with their title company and the lender to get exact figures on closing costs and loan balances and to find out what procedures they have in place. If they can afford it, sellers should also consider getting a home inspection to determine what repairs are needed on a home and how this might affect its value.
NOTE: Seller will have to send a brief letter to all mortgage holders, giving them permission to speak with your Realtor. Otherwise, privacy laws will prevent them from talking to you about the loans. It’s also critical to build a relationship with the seller’s lender. Once you have credibility, the entire process becomes easier.
how would I and the seller need to talk to about the problem?
If there are a first and second mortgage or a home equity line of credit, you may have to talk to more than one lender to get approval for a short sale. In addition, you may also need approval from the entity that holds the pool of loans if the mortgage has been securitized.
"The presence of two lenders makes a short sale more complicated since it’s often the lender holding the second, or junior, mortgage that has to absorb most of the loss.
Opinions differ, but most experts suggest that you let the lender involved know as soon as possible of the potential short sale. Others say you should wait until you have an offer because you’ll get no action until then. “Without a viable purchase offer, your deal won’t be considered by mortgagees,”
Tip: Be sure you contact the bank’s loss mitigation department, which will be the group to decide whether to accept a short sale, rather than the collection or customer service department, which is only interested in recouping past due loan payments. "Finding the decision maker is often one of the biggest initial challenges in a short sales,"
What information will the bank need to decide whether to accept a short sale?
The sellers’ submission package should include W-2 forms from employers (or a letter explaining the seller is unemployed), bank statements, two years of tax returns, and other financial documents outlining income and debt obligations. The bank will also need comps or a broker’s price opinion showing your estimate of value.
In addition, the sellers should submit a “hardship letter,” explaining the circumstances that make it impossible for them to pay the full amount of the loan. The seller needs to be able to show true financial hardship. Someone with the assets or the income to pay is unlikely to be considered.
Alternatives to Foreclosure When Your Clients Can Afford to Keep the Home
Sometimes your clients may experience a temporary reduction in income or financial hardship, such as an illness. When this happens, they may temporarily be unable to make their mortgage payments. Once the situation improves, however, they may be able to resume the scheduled payment of the mortgage.
The servicer may be able to arrange an increase in monthly payments until the loan is brought current. This means that each month your clients would add an additional amount of money (determined by the servicer) to their regular monthly payment until the amount that was overdue has been repaid.
Forbearance is a formal, written agreement between your clients and the mortgage servicer to reduce or suspend monthly payments for a specific period of time. This means that for a period of time, your clients would either pay only a portion of their regular mortgage payment or not make any payments at all. At the end of the agreed-upon period, your clients would be required to resume regular monthly payments as well as pay additional funds to make up for the past due amount. During the time that the payments are either suspended or reduced, your clients would have the opportunity to resolve the financial hardship they are facing.
In situations where the servicer does not believe that a repayment plan or forbearance is the appropriate course of action, a loan modification may be considered. A loan modification involves changing one or more of the terms of a mortgage in order to help your clients bring a defaulted loan current and prevent foreclosure. This option generally is considered for homeowners whose financial problems are expected to be more long term.
Alternatives to Foreclosure When Your Clients Cannot Afford to Keep Their Home
As hard as your clients might try, sometimes financial hardships don't get turned around as quickly as they would like. These situations may include a long-term layoff, job loss, mandatory reduction in pay, disability or illness that results in a decrease in income or an increase in major medical expenses, or the death of the principal wage earner.
In these instances, it may not be possible for your clients to continue to meet all of their financial obligations and the only appropriate course of action is relinquishing ownership of the home, while avoiding foreclosure. These alternatives include:
Assumption of the Loan
An assumption is a method of transferring a house to a new buyer who agrees to take responsibility for (assumes) the existing mortgage. Not all mortgages are assumable, so this option must first be discussed with the servicer.
Deed-in-Lieu of Foreclosure
A deed-in-lieu of foreclosure takes place when your clients voluntarily give the deed to the property to the servicer. Generally, a deed-in-lieu is considered only after all other alternatives to foreclosure have been explored.
To determine if you qualify for an alternative, you will need to provide follows;
1. Financial statement completed by all borrowers listed on the
Mortgage or deed-of-trust. Be sure to sign the statement.
2. Copies of the last two month pay-stubs from each borrower listed on the
Mortgage or deed-of-trust. Note: If you are self-employed, send copies of your
profit and loss statements, ledgers and receipts.
3. Provide evidence of any 'Junior' (second or more) liens.
4. A letter requesting assistance and explaining the
Circumstances of the difficulties you are experiencing.
5. Last 2 years of complete tax returns.
Normal collection activities will continue while your account is being
Reviewed for the options mentioned above. If you are obligated to make all
Future payments as they come due even while we are evaluating your situation. Please note that participation in a workout program is not guaranteed. After received the completed package, Lender will need 2-3 weeks to review and determine whether you qualify for an alternative to foreclosure.
I have experience in Short Sale! I can help you by negotiating with your Lender on your behalf in getting approval on Short Sale.
Call today 612-532-3151