Short sales occur when home prices fall and mortgage debt exceeds the value of the property. If the lender agrees, homeowners can sell their depreciated home and settle their debt for a reduced sum. Nobody keeps statistics on how many short sales close each month, but based on anecdotal evidence they are increasing at an alarming rate.
What do I do?
- We work to get your homes closed through a short sale process by working directly with your lender.
- We guide you through the entire process from start to finish
- We work for FREE until we get to closing, and then the lender pays my fees
- We adhere to very strict ethical guidelines
- We work for FREE until we get to closing, and then the bank pays my commission.
I am an experienced short sale agent that will work to get you to closing, and keeping a foreclosure off of your credit report.
Do you qualify for a short sale? Give me a call to find out!
Hopefully this will help answer many of the questions you might have about Short Sales. However if you are still unsure about what a Short Sale is or whether it's right for you contact any RE/MAX True Advantage agent at 706-922-9292.
What are Short Sales?
A short sale in real estate accrue when the outstanding loans and liens against the property, after closing costs are paid, are greater than the proceeds from the sale of the home, and the lender agrees to accept this lower payoff amount. This occurs only when a home seller qualifies for a short sale through providing hardship, and the lender agrees to this lower payoff amount
Why is it to my advantage to do a Short Sale?
A foreclosure can impact your credit far more, especially in the long term. In fact, some banks don't report a short sale. In addition, in the event of a foreclosure, in many states the lender will seek a deficiency judgment in the amount you owe. They could even come after other properties and assets of yours, including vehicles. Your credit could recover from a short sale in less than two years, where a foreclosure or bankruptcy can take 7-10 years.
Can I get any money back from a Short Sale?
As part of the Making Home Affordable Plan, and specifically the new Home Affordable Foreclosure Alternatives (HAFA) initiative recently announced November 30th, 2009, qualified home owners can get $1500 BACK from a short sale to use towards relocation expenses! Some lenders are offering even more!
Do I qualify for a Short Sale?
Mainly that you are in some type of "financial hardship". This can include: Loss of employment or income, divorce or separation, relocation or job transfer, major illness and medical expenses, or high dollar repairs without the recourse's to make them, or increased bills or living expenses. A good rule of thumb is that a short sale is not for those that "want" to sell, but only for those that "have" to sell. You typically must prove your inability to pay, however many lenders have become more lenient lately and will make exceptions sometimes for homeowners who are not even in hardship.
If I do a short sale will the lender try to collect the balance later?
NO, not normally. We will work to get a full release for you from all remaining balances. This release will fully forgive and deficiency between the amount you owe, and the proceeds from the sale of your home. You should consult an accountant regarding tax ramifications, especially if it is an investment property.
Why would a mortgage company agree to accept a Short Sale?
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, collecting 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 Requirements - Delinquent and non-performing loans place another burden on mortgage lenders. For all delinquent and non-performing loans lenders must set aside funds 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 for them.
Do lenders approve all Short Sales?
In a word, no. 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 Mitigation's Department, we know how to keep the file moving towards approval. The first step is to get pre-qualified for a short sale. There is no charge for this and it's easy.
I have two loans; can I still do a Short Sale?
Yes. We can work with both lenders (many times the same lender holds the 1st and 2nd loans) 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 the two lenders to cooperate. In the end neither lender wants to own another home through foreclosure.
My property is in rough shape and needs work, can I still so a Short Sale?
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 the 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.
I am concerned about my credit, how will a Short Sale affect my credit?
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 even than Bankruptcy. In the course of getting your Short Sale approved you may miss your mortgage payments, and these will show on your credit. A Short Sale may appear on your credit report as a "settlement for less than owed" or "pre-foreclosure in redemption" and can drop your credit score an average of 80-100 points. In most cases, you will likely be able to resume normal borrowing relatively quickly. With a Foreclosure you can expect and average of 200-280 points dropped from your credit score and it can take 7-10 years to fully recover.
What is a Forbearance Agreement?
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.