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What is a Short Sale? A short sale means the seller's lender is accepting less than the mortgage balance to release an existing mortgage. Just because a property is listed with short sale terms does not mean the lender will accept your offer. Lender acceptance may depend on several elements of your offer as well such as the percentage of your down payment, closing date, other negotiated terms, and possibly whether or not you are pre-approved for a mortgage.
As a general rule, the seller will need to be in default on their mortgage and must have stopped making mortgage payments, before a lender will consider a short sale. This is not always the case, however, if a seller can show that they are at or near the end of any additional funds that are currently being used to make payments. A hardship letter will allow the lender to see the facts of the case and make a determination as to accepting any offer or not.
Always Hire a Realtor That Has Experience With Short Sales A Realtor experienced with Short Sales can help you find properties that are being sold as Short Sales. Often these properties are only advertised as Short Sales to the Realtor community through the Multiple Listing Service, and are not readily available to the general public.
If you are a Seller who finds yourself in a possible Short Sale situation, it is absolutely essential that you utilize the services of a Realtor who is experienced in Short Sales.
Regardless of if you are buying or selling a Short Sale property, a Realtor with experience in short sales will help to expedite your transaction and protect your interests. You don't want to miss any important detail due to inexperience or find out your transaction is not going to close on time because no one has followed up in a timely manner.
You can't just decide you're going to sell your home at a loss by asking your lender for a short sale, and expect them to readily agree. Lenders will more than likely not consider a short sale if your payments are current. Sellers need to provide a hardship letter to the lender. Sellers may also owe taxes on the amount of debt that is forgiven.
Submitting Your Offer to The Lender After you make your offer, your Realtor will send it to the lender for approval. Keep in mind that, even though the Seller does not get any of the proceeds from the short sale, he or she has to sign the contract once accepted by the lender. Also the contract isn't signed by the seller until the contract is accepted by the Lender. The lender will review the offer in detail and will schedule a Broker's Price Opinion (BPO) which is a sort of abbreviated appraisal, comparing this property with other comparable properties that have recently sold or are currently for sale.
Timing Is Everything A very important notion to keep in mind is that the Short Sale process takes a considerable amount of time. Depending on the details of the situation, a Short Sale will typically take much longer than a traditional sale, because of all the added steps involved in the process. Be patient, and let your Realtor make sure all the important details are taken care of.
Foreclosure vs. Short Sale Most mortgage experts agree that sellers will take a bigger hit on their credit score by going through foreclosure versus a short sale. The short sale effect on credit will show up as a pre-foreclosure in redemption status, which will result in a loss of 80 to100 points on the FICO score versus 250 -- 280 points with a foreclosure. If you're a seller trying to decide whether to let a home go through foreclosure versus attempting a short sale, salvaging your credit is the main advantage to doing a short sale. Always seek legal and tax advice before making any decision regarding a short sale. Always consult an experienced Realtor when thinking of buying or selling a short sale property.
Deed in lieu of Foreclosure This is another option that has about the same impact as a Short Sale on your credit. this normally requires the property be listed with a Realtor specializing in Foreclosures and Short Sales and normally the Realtor will charge a flat fee for this service since the Realtor will not make a commission if the lender takes the property back. This fee is normally 1/2 % of the listed price or a minimum of $1,000. This fee goes to defray the advertising and other expenses of the Realtor so that you can do the Deed in Lieu of Foreclosure. Most real estate companies place a lien on the property for commission. A Realtor, as a specialist normally collects a $1,000 fee up front so that no lien is placed and in the event the property sales as a Short Sale, the $1,000 is returned to the seller after closing.
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Please click below for detail of the Mortgage Forgiveness Debt passed by Congress as it relates to Short Sales.
http://www.govtrack.us/congress/bill.xpd?bill=hr110-703
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