A short sale can be an excellent solution for homeowners who need to sell, and who owe more on their homes than they are worth. In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions. Recent changes in corporate policy and the Obama administration have also improved the chances of getting a short sale approved.
But to be technical, here’s a more official definition:
■ A homeowner is ‘short’ when the amount owed on his/her property is higher than current market value.
■ A short sale occurs when a negotiation is entered into with the homeowner’s mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then ‘sold short’ of the total value of the mortgage.
For homeowners to qualify for a short sale, they must fall into any or all of the following circumstances:
■ Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
■ Monthly Income Shortfall – In other words: “You have more month than money.” A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
■ Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
This seems simple enough, but it is a complicated process that takes the expertise of experienced professionals. I hold the CDPE® Designation and am ready to identify all possible options and, when possible, assist in the quick execution of a short sale transaction.
If you have questions or feel you may qualify for a short sale, please contact me at firstname.lastname@example.org or (916) 678-1803 for a free consultation.
Understanding your options now could mean all the difference in the world.
What is a Short Sale?
Is a Short Sale right for me?
If I do a Short Sale, how much will I have to pay to sell my home?
How do I get started on a Short Sale?
Can I simply deed my property to someone else and avoid the hassle?
What sort of hardship would my lender consider legitimate?
I am current on my mortgage, will my lender consider a Short Sale?
Why would a mortgage company agree to accept a Short Sale?
Do lenders approve all Short Sales?
I have two loans, can I still do a Short Sale?
My property is in rough shape and needs work, can I still do a Short Sale?
I am concerned about my credit, how will a Short Sale affect mycredit?
My income problem was temporary. Do I need to sell my home?
What is a Forbearance Agreement?
A Short Sale is the sale of a home when sales proceeds do not fully pay off the existing loan(s) and lender(s) accepts a discounted payoff to fully satisfy the loan.
The best part, the existing lender pays virtually all sales costs, including commissions, escrow and title fees and repair costs. You get your home sold, the loan(s) paid off and you avoid foreclosure.
Mortgage lenders are increasingly willing to work with borrowers faced with a financial hardship to accept a discounted payoff on a mortgage. If you are faced with a hardship that makes it likely you will be unable to meet your obligation on your mortgage, your lender would prefer to settle the matter with you as opposed to taking the property through foreclosure.
As you consider the option of pursuing a Short Sale, remember your lender is looking to limit any potential loss on your loan. By completing a Short Sale, your lender has arrived at a solution that is, for them, much better than a foreclosure.
Bottom line, your lender wants to work with you.
Nothing. It’s true, in most cases you will pay literally no sales costs if your lender approves the Short Sale. All commissions, title and escrow fees, and even most repair expenses are paid by the lender as part of the Short Sale approval.
Remember, lenders approve Short Sales and accept the resulting loss in an effort to avoid bigger losses through foreclosure.
It’s easy. If you would prefer to discuss it on the phone, or set an appointment call 916-678-1803. You can also send an email request to Keisha at email@example.com. There is no charge to you at any time. It is as simple as contacting us and we will get to work.
Deeding your property to someone without paying off the loan is nearly always a bad idea. In the first place, the lender still considers you primarily responsible for payment on the loan. If loan payments do not get paid, or if the lender ultimately forecloses, this will show on your credit.
Secondly, when you deed your property to someone else, you give up control of the property. Along with the deed goes the ability to control the property.
Do not deed your property to someone without paying off the loan unless you have consulted with an attorney.
To some extent, that will depend upon the mortgage company considering the Short Sale request. Generally, so long as the hardship is real and the mortgage company believes the loan is likely to become delinquent as a result, the Short Sale request will be processed by the Loss Mitigation Department. A big key to getting Loss Mitigation to accept a hardship is to submit a strong hardship letter. The hardship letter sets the tone for the entire file.
Below you will find a list of “hardships” that are common and frequently accepted by mortgage lenders.
- Family illness or injury
- Illness or injury in the extended family – particularly if it forces relocation
- Job relocation when the property is equity deficient
- Job loss or significant income loss
- Divorce or legal separation
- Adjustment in mortgage payment or unforeseen increase in living expenses
The answer is, maybe. More lenders will accept a Short Sale file for approval on loans that are not delinquent. There are still some lenders who will not accept the file until the loan is delinquent. Once your property is listed and an offer is received, we can put your Short Sale file together within a couple days and submit it for approval. (Remember, there is no charge for this). That is the best way to determine if your lender will accept a file for approval on a loan that is current.
There are actually several reasons why a mortgage company would approve a Short Sale payoff, including the following;
- Legal Concerns – Mortgage lenders have come under legal pressure to work with borrowers to equitably resolve situations where borrowers are unable to meet their mortgage obligation, particularly when the borrower makes an effort to arrive at a compromise solution.
- Wall Street is watching – Mortgage lenders rely heavily on their ability to package and sell bundles of loans on the secondary mortgage market. They need to sell these bundles of loans in order to put the funds back to work by loaning the money again and collect loan fees along the way. If mortgages perform poorly after they are sold it could impact the lender’s ability to sell their loans on the secondary market. A successful Short Sale gets the loan payoff resolved quickly.
- Asset Management Expenses- If a lender acquires a property through foreclosure,
the property will be managed until it is repaired and resold. It is expensive to manage real property assets – homes – spread throughout the region, the state and possibly even the nation. Keeping properties maintained, keeping utilities on, making repairs and the administrative costs attached to these activities are all costs the lender would prefer to avoid. A successful Short Sale eliminates most of these costs.
- Reserve Requirement- Delinquent and non-performing loans place another burden on mortgage lenders. For all delinquent and non-performing loans lenders must set aside funds in reserve to deal with potential losses. These funds cannot be put to work generating new loan fees until the bad loans are resolved. A successful Short Sale lets the lender put more money to work.
No. Many variables must be considered and be properly addressed for a lender to approve a short sale. Once those items have been addressed, there is still no guarantee that they will approve. That is why it is critical to work with someone that has extensive experience at getting Short Sales approved.
From the presentation of the Short Sale package to the lender to working with the lenders Loss Mitigations Department, we know how to keep the file moving towards approval.
Yes. We can work with both lenders (or in some rare instances, three or more) to put together a Short Sale transaction. Even if the value of your home is below the balance of the 1st mortgage, we can normally get all lienholers to cooperate.
In the end, neither lender wants to own another home through foreclosure.
Absolutely. In fact, lenders are more motivated to do a Short Sale on a property that needs work than on a property that doesn’t. The lender knows the risk of loss goes up when they foreclose on a property that needs lots of work.
Aside from expense of completing the work, lenders are simply not set up to get the work done. They are in the loan business, not the fix- it business.
The big key here is to avoid foreclosure. By nearly any measure, a foreclosure is the most damaging event your credit status can encounter – worse than bankruptcy. In the course of getting your short sale approved you may miss your mortgage payments, and these will show on your credit.
By avoiding foreclosure, you will likely be able to resume normal borrowing (car loans, credit cards, consumer goods and such) relatively quickly.
You may be able to keep your home. You need to convince your mortgage company of two things:
The problem that caused the mortgage payment disruption was beyond your control – illness, injury, temporary disability or forced job change are a few examples:
You are now solidly in a position to stay current on your mortgage payments and make some progress towards making up the delinquent amount.
A Forbearance Agreement is a written agreement with your mortgage company in which you arrange to keep your home. The agreement will normally include two primary elements:
The borrower’s promise to remain current on the mortgage going forward Some plan for making up the delinquent interest and other charges. It may mean making additional payments to the mortgage company or the delinquent amount could be added to the loan to be paid later.
Don’t see your question answered here? Ask your question below or contact Keisha at firstname.lastname@example.org, or (916) 678-1803.