Very simply a short sale is when a home is selling “short” of what is owed the lender. A major question of a short sale is if your lender be willing to accept less. A seller has to prove to his lender that he is incapable of making the payments and bout to go into default or already has.
This is known as proving “hardship”. For a lender to agree to take less, it requires a hardship package to be filled out by the seller to prove their financial status. This may vary from lender to lender but usually requires submitting W2s, bank statements, hardship letter, itemized expenses, tax returns and maybe letters from family and friends. Sellers have asked me about a short sale and not understanding that all income sources must be reported like a 409K, all properties, stocks, bonds, everything they own must be reported.
Clients losing jobs, moving out of state, experiencing serious medical conditions are some of the factors that may support a hardship. As soon as a hardship begins the seller needs to consult with a professional Realtor to see if they qualify.
With so many foreclosures many lenders do not want to own real estate so they are becoming more negotiable to participate in a short sale.
Your accountant or financial advisor will tell you that missing your mortgage payment will have a huge impact on your credit rating. While selling “short” will also affect your credit, it is not be as devastating as a foreclosure.
Typically, in a short sale a seller may be able to buy another home within two years. With a foreclosure, as with bankruptcy, it may take 3-7 years before another home can be purchased depending on what has been done to restore credit. The effect of a short sale on a seller’s credit report often results in a loss of 200 to 300 points on a credit report and can stay on the report for 7 years.
Consumers are allowed to put a short statement on their credit report to explain the adverse information which may soften the blow. When it comes to credit, there are many factors and it is best consult an expert. This information is not intended as legal or financial advice and you should consult your attorney or accountant.
The clock is ticking so time is of the essence. In today’s Real Estate Market, homes can take up to a year to go under contract. If you are really committed to lessen the impact on your credit and avoid foreclosure, you should consult a Realtor immediately and be honest with him/her of your situation. A Realtor will get your home sold much quicker than you trying to sell it by owner. A Realtor gets your home using maximum exposure by using their local MLS, multiple web sites and numerous marketing programs.
When selling “short” the seller does not pay any commission, title insurance or other costs associated with a sale. These items are paid by the lender.
After finding a Realtor experienced in selling “short” make sure you disclose all the circumstances and do not try selling it yourself. This will delay getting the cooperation of your lender and getting the necessary paperwork complete. A short sale can be done even if a seller is not in default on their mortgage. However the lender gives priority to those sellers who are in default and even more priority to those that have gone to sheriff’s sale and are in the redemption period. Once a default occurs, the process, including the redemption period, can take 9-12 months. If a home is listed after it goes to auction, the time is significantly reduced.
When choosing a Realtor, ask about their experience with selling “short” Ask how they will market your home including the resources they use on the internet. Above all, make sure you can work with your Realtor. This is a difficult time in one’s life when you face losing your home and you want someone who is empathetic, aggressive and understands your difficulties.
The process can be at a couple of stages before a home has to be vacated. It is advisable to contact the lender when you know you can no longer make your payments. There are programs that sellers may qualify for to remain in their home.
Lenders do not want to own Real Estate.(REO) Their ability to finance loans depends of not having inventory on their books. Many more lenders are willing to work with sellers depending what has caused the current circumstances. There are no guarantees and it varies from lender to lender.
Upon missing the first (or second) mortgage payment the lender will call to evaluate the situation. After missing two or more mortgage payments, the lender will send notice that they are proceeding with a foreclosure. Keep all notices, names and numbers of the people from the bank. This information will make it much easier for your Realtor to contact the right people at the bank. Once the notice of foreclosure is received, it must be published in the newspaper for four-five consecutive weeks and then it goes to auction. Auctions are held regularly in a specific location within the county.
Once a home goes to auction (sheriff’s sale), there is a redemption period of 3-6 months, during which time you can still sell “short”. Many lenders will continue to work with a Realtor to complete a short sale during this time. A Realtor who works with that particular lender may be authorized to offer a seller “cash for keys” to vacate earlier and forfeit the redemption period. Lenders cannot force a seller to leave until the redemption period is over. If the home is not vacated at the end of the redemption period after the sheriff’s sale, the eviction process will begin.
StlShortSale.com and The Helderle Team are ready to help you through this very trying period. Contact us at 314-267-4841. All inquires are kept confidential.