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Understanding Short Sales

Avoid Foreclosure!! 

Loss Mitigation Technique of the Short Sale 

 

 


Will a short sale affect my credit?

Answer:  Yes, but the experts say that a while a foreclosure impacts your credit by over 250 points, a short sale only affects your credit score by 80-100 points.  This will let future creditors know that while you didn't keep your obligation to pay off your mortgage, it shows that you made a responsible attempt to get the lender majority of their money and that you had integrity.  One thing you must realize the sooner you start the short sale process and sell your home the better.  The longer you wait the more delinquent marks you will have on your credit report.  So if you wait until 2 weeks before the auction of your house, and its takes another 4 months to work out the short sale, your credit will still be taking a hit showing 30, 60, 90, and 120+.  Those types of marks are really what hurts your credit.  

 

How much can I get if I short sale my home?

Answer:  Lenders don't want you to receive any money as a result of them taking a discount.  This makes sense, since they are the one's taking a loss.  Any proceeds they have you sign a waiver saying that you won't get any money at the closing.  

What does it cost me to short sale my home?

 

Answer: Nothing.  It’s true.  In most cases, the homeowner will pay no sales costs if their lender approves a short sale.  From commissions, to title and closing fees, and even possible home repair expenses are paid by the lender as part of the short sale approval. 

 

How should I price my home for sale as a short sale?

 

Answer: Most short sale properties should be priced at or near fair market value.  The bank's know through various BPO (Broker Pricing Opinions) and appraisals what a home is worth.  They won't allow you to price it above or below market and approve a short sale contract. Some agents will begin with the total payoff amount owned by the homeowner.  My advice and counsel is to consider listing your property based on a CMA or appraisal at 10% below the first mortgage payoff, PLUS 10% of the second mortgage payoff.   Mortgage companies and lenders have formulas for what percentages they feel comfortable accepting below market value. 

 

 

My lender sent a letter through their attorney, do I have to leave my house now, and is that a foreclosure?

Answer:  No, the letter from your lenders attorney is to put you on alert that you need to make up your payments and that a sales date has been set.  Only on the sales date are you forced to move from your house.  Foreclosure is when the auction takes place.  In the letter from your lender’s attorney you should have two dates, one is the date you ordered to go to court to plead your case.  The second date is the actual foreclosure.  There is time!  Even if your home is already in the foreclosure process, a short sale can be initiated and we can stop the foreclosure process.  Contact me and let me help you see if we can buy more time through a foreclosure, Deed-in-Lieu, or some other option.  The foreclosure is a last case scenario for a lender.  Studies show that the lender only recoups 30% of the mortgage if they foreclosure while they can recoup 60% of the value of the loan if the allow you time for a short sale.  I can get the foreclosure clock stopped for you!

 

If you have any more question about short sales contact Hank Bailey.  We want to save as many people from foreclosure as possible!!! 

 

Making an Offer on a Short Sale? What You Need to Know

 



Are you looking to buy a new home? Are you thinking that now's a great time to find bargains? Before you make an offer, it pays to know a little about the seller's situation.

 

If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.

 

A short sale is different from a foreclosure, which is when the seller's lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.

 

You're a good candidate for a short-sale purchase if:

 

·      You're very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.

·         Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you're preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.

·         You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.

 

If you're serious about purchasing a short-sale property, it's important for you to have expert assistance. Here are some people you want to work with:

 

·        Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who's knowledgeable about the short-sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.

 

·       A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they've represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”) Make sure that Realtor is a Certified Short Sale Specialist.

·        

       Title officer. It’s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it's much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.

 

                                     

    Some of the other risks faced by buyers of short-sale properties include:

 

·       Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.

 

·       Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.

 

·       No repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.

                                                         The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it

                                                         through, a short sale can be a win-win for you and the sellers.

 

* Not all real estate practitioners are REALTORS®. A REALTOR® is a member of the NATIONAL ASSOCIATION OF REALTORS® and is bound by NAR’s strict code of ethics.

 

Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA.