The Short Sale Help

As the foreclosure rate in the U.S. continues to climb, many homeowners are looking for a way out without having to foreclose on their homes. One of the solutions that is available to homeowners and that is also beneficial to both the lender and the homeowner is the option of doing a short sale on the home. However, there are a few qualifications that must be met before a lender will approve a short sale.

Get The Current Market Value Of Your Home

In order to qualify, the current market value of your home must be less than the outstanding mortgage value. The mortgage value usually includes any fees and penalties you’ve incurred from not paying your mortgage. So, if your current mortgage value is $150,000 and your home is assessed to be worth $120,000, you’ve met the first qualification.

Mortgage Default

In order to qualify for a short sale, your mortgage must also be in default. This means that you must be behind on your payments and your lender has to have sent you a notice of default. A notice of default is the formal notification by your lender that you are in default. Even if you have missed mortgage payments, unless you receive this formal notification, you are not in mortgage default and you do not qualify for a short sale.

Proof Of Financial Hardship

You must be able to provide proof that you are experiencing financial hardship in order to qualify. A letter should be written asking your lender to consider a short sale for your home and then you must provide as much detailed information as possible. A short sale Realtor can assist you with getting together the required information, as well as with writing your letter. Including a few months of pay stubs along with any other supporting information will help you become qualified. The burden of proof lies with you, so supplying the lender with as much information as you can will go a long way toward getting approved.

Owning Any Assets

You must not have any assets that could be sold to put money toward the mortgage payments, or used to pay the difference. You will need to supply your lender with a financial statement along with your income tax returns and any other supporting financial documentation that you might have. If you are found to have any assets, your request will be denied.

If your lender finds that you meet all of the above requirements, you will be approved for a short sale. It is better for the lender than a foreclosure because the lender will lose less money in the transaction. It is also better for you as the seller because it stays on your credit report for a shorter amount of time. Your lender may also give you some money toward your moving costs in some situations.

Losing your home is not something that anyone can plan on. However, the option of a short sale is one that is available to you if you meet the proper qualifications. Although heartache will accompany the proceedings, doing a short sale offers you a way to move ahead and begin planning for a future once your financial hardship has passed.

If you have fallen behind on your mortgage payments and your conversations with your mortgage lender have not produced an equitable solution for getting you back on track, be assured that there are still viable options available to you. You may be under the impression that walking away from your home and allowing the bank to foreclose on your home is the only option you have left, but fortunately, this is not necessarily the case. Although it may not be possible to stay in your home, you do not have to succumb to the ramifications of a foreclosure.

Once you fall behind on your payments, your lender will send you an informational packet that contains important options that you need to consider. Unless you are well versed in real estate jargon, you may not fully understand what those options fully entail, which makes coming to a decision yet another hardship. By understanding your options and what risks are involved, you can make an educated decision that allows you to move on with your life.

Is a Short Sale a Good Idea?

You may not yet be at the stage where you are at risk of losing your home to foreclosure, but perhaps are feeling the pinch of a high mortgage payment and excessive bills due to reduced income, unemployment or other hardship. With all of the current media focus on short sales, you may be wondering if a short sale is a good idea. For most borrowers, a short sale represents a unique opportunity to get out from beneath the burden of an upside-down property; this term refers to your home actually being worth less than the outstanding balance.

Short Sale Facts

Of course, as with anything else, there are some important facts that you need to know before opting to do a short sale, and that may impact the question, “Is a short sale a good idea?” A short sale occurs when the bank, that gave you the loan to purchase the property, agrees to settle for less than the amount of your outstanding balance. Your lender has to approve the short sale first, and can ultimately choose to deny the short sale if it doesn’t make financial sense for them to take the loss. If the bank agrees to the terms of the short sale and the deal closes, then essentially you are no longer financially responsible for the debt. However, keep in mind that if you hold a second or third mortgage on your home, the holders of those liens may not agree to just accept the loss and might still hold you liable.

Steps to the Short Sale Process

Is a short sale a good idea for you? If you think it might be, you must follow these steps:

1. Advise your lender that you would like to do a short sale.
2. The lender will send you a Short Sale Packet; fill it out and submit it with the required documentation.
3. Contact an agent to list your home.
4. Once you have an offer, your agent submits the offer for the bank to review.
5. If the bank agrees to the terms, the green light is given to close the transaction.

It can take anywhere from 45 days to several months for a short sale to go through, during which time you can usually stay in the home. Once completed, you will sign paperwork that will define the extent of your financial obligation from that moment on (usually you are debt-free, but in some instances, the bank may ask for a small contribution from you to offset costs).

When it comes to a quick sale versus a short sale in the real estate market, you may find yourself confused and bewildered on what exactly would be the best move for yourself and your family. Selling your home can be a frustrating process, especially if you find yourself in a situation where you have to get out fast and find it completely necessary to close quickly.

The differences between a quick sale and a short sale of your property.

A short sale is a sale that occurs when you sell your property for the value of that which is under the price of the mortgage which was taken out. Let’s say you took out a loan for $125,000 to pay for the property, but you find yourself in a bad situation where the bank is foreclosing. The bank would then have to turn around and sell the property, essentially ruining your line of credit since you took out a loan you were unable to pay back. In this situation, a work around is available.

Usually in this situation, in order to seal the deal and sell quickly, it is expected that the buyer pays much less for the home than what you purchased it for. However, in exchange for buying the home at a low price, you walk away without taking a hit on your line of credit. In this situation, both the buyer and the seller get the best end of the stick. You as the seller don’t get your credit completely destroyed, and the buyer comes out a happy camper since they got what could be considered a bargain deal.

A quick sale is much simpler to explain, but there are multiple things which could be considered a quick sale. A quick sale can happen if say you are the seller of the home, and someone has an offer for you completely in cash. This makes the process go by faster since there are no middle men to contend with.

A quick sale can happen from ten to thirty days, where in other buying processes it can take much longer. Basically in a quick sale, both you, the seller, and the buyer are somehow motivated to get it settled as quickly as possible, and there are less loop holes to jump through.

When assessing which option would be best for you

You have to consider the kind of specific situation you find yourself in, and what kind of offers you have on the table. If you find yourself at a complete and utter loss and absolutely have to get out of the mess that has been created around you, it would be the best option to go with a short sale where both you and the buyer can profit. However, if you find yourself in a situation where you need to get out quickly and a buyer is willing to put cash on the table with no middleman, both you and the buyer win by getting the settlement done quickly and efficiently.

Simply put, a short sale is any sale of a home or property where the selling price falls “short” of what’s owed to the lien holder(s); usually the bank or financial institution holding the mortgage.

It’s important to note that while the lien holder may agree to accept less than the balance owed, a short sale DOES NOT FREE THE HOMEOWNER FROM HAVING TO PAY THE BALANCE IN FULL, unless specifically negotiated up-front. Short sales are often preferable to foreclosures because they cost both the borrower and lien holder less time and money, attract a higher purchase price, and may cause less damage to the borrower’s credit report.

If you’re thinking of either selling or buying a short sale property, here a few of key factors to consider:

There’s nothing short about it.

With the backlog of distressed loans and properties on most bank’s books, it can take a long, long time to hear if the lien holder accepts the buyer’s offer—sometime as much as six months. This is especially true on properties that have second mortgages or home equity loans through multiple lenders, as each and every party has to give their consent.

Get an expert.

There are a great many issues and nuances to a short sale that can really derail the process if not properly addressed at the very beginning. That’s why it’s best to retain the services of a real estate agent that specializes in short sales. For instance, it’s the agent that usually negotiates with the bank, not the homeowner. An agent familiar with the process can also help set the highest realistic selling price, thus saving everyone involved a lot of time, money and hassle

Your agent’s not enough.

Short sales can have an impact far beyond a damaged credit report. There could be major tax and legal implications as well. Ask your real estate agent to refer a reputable lawyer and accountant who can outline what you need to know…and what you need to avoid!

It can work out.

Despite all the fear and uncertainty surrounding short sales, when properly executed they can have tremendous advantages. Banks get more return on their investment than they would through a foreclosure. Homeowners are spared the emotional and financial hardship of carrying an underwater home on their backs. And buyers can snap up some tremendous bargains.

Bottom line

If you’re going to sell or buy a short sale property:
•Do your homework
•Be realistic
•Have an open mind…and lots of patience