Short Sales

Short Sales... What is It?

     More sellers are turning to short sales as a way to avoid foreclosure.  So how does it work?  Well in a short sale, the seller arranges with their mortgage lender to accept a price that is less than the amount they owe on the property.  As part of this arrangement, the lender typically agrees to forgive the rest of the loan.  As a result, the seller does not have to go through a foreclosure, the buyer picks up a property at a discount, and the lender avoids taking on the burden of unloading the property.

Sounds good right?  Well, sellers need to know that a short sale may damage their credit, though probably not as much as a foreclosure.  Also, the lenders will generally only agree to a short sale if the seller is many payments behind and has received a default notice. (This is quickly changing... Its suggested that the bank be notified and be asked for criteria)  Buyers may get a great property at a discount, but they also will need to go through some extra paperwork too.  Not to mention, they also need to be prepared to roll up their sleeves if that property needs fixing up. The homes are Sold-AS-IS.

Frequently Asked Questions?

What is a Short Sale?

A short sale occurs when a lender accepts less than what is owed on the mortgage.

Will the bank pursue me for the difference I owe?

Not if the loan is non-recourse (purchase money)

Does some sort of Hardship have to be present for a short sale to occur?

Yes. A short sale is for people suffering financial or personal hardship.  It is not simply an escape from a bad investment or choice of loan.  Lenders are placing increase focus on whether ther is a true hardship.

Why do I have to submit a short sale package?

All lenders require a complete short sale package, including tax return, bank statements, pay stubs, other forms of income, houehold expenses and a handwritten hardship letter.

Can I sell my property for any price?

 No.  Lenders are looking for particular rtios in comparison to markt value, and unreasonable offers have a very small chance of success.  If your lender believes it is better off financially to foreclose, it will do so.  The lender will foreclose if you do nothing or if you give them an incomplete short sale packet or an unreasonable low offer.

Will I get any monies from the sale?

Not usually.  Most lenders will not allow a borrower to recieve any money.  If the lender thinks you are getting paid from the sale, they will terminate the short sale.

How long will this take?

This is entirely up to the lender.  Some lenders take as little as two weeks, some over six months.  The only way to know is to begin the process.  The key is makig sure that your Short Sale package is complete with continuous follow-up with the bank.

Will a Short Sale hurt my credit?

Perhaps.  Though the short sale may not show up on your credit, the short sale is reorted as "Paid-Settled".  If you are late with your monthly payments, your lender will report this and  your credit will be affected.  A Foreclosure is detrimental to ones credit score.