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What Exactly Is A Short Sale?
A short sale is when a homeowner owes more than current market value on the home. When you cannot refinance your home, and you cannot sell your home for what you owe, you could be a good candidate for a short sale.
Frequently Asked Questions for Homeowners:
Would I qualify for a Short Sale?
That depends ..
1. As early as a year ago a good Short Sale candidate was a homeowner who was behind on their mortgage payment(s) and was unable to keep up with all of their monthly obligations. Now with the new MHA Program (Making Home Affordable) announced on March 4th, 2009 you do not have to wreck your credit. However you still need to show a financial hardship. What is a financial hardship in the eyes of the bank? (Job Loss, Catastrophic Loss Of Income, Death of a Spouse, Long Term Illness, Divorce, and Job Transfer)
2. A good short sale application is one where the current market value is far less than what you currently owe on your mortgage. Without help, it is eminent that your home will be foreclosed.
How do I select the right team to successfully manage and negotiate my Short Sale?
Before hiring just any "Agent" to assist you in a Short Sale, make sure they are qualified and understand all the work that is required to see you through to the end. Check out this short video as I explain Short Sales. Not all Realtors® understand Short Sales. There is a lot of work involved and the process can take months. This is not Real Estate 101. Make sure the person you hire to help you can prove to you they are helping sellers Sell By Short Sale. Demand Proof before you sign anything.
This is your families’ financial well being at risk. Be careful, ask questions and don't just trust your friend who is a Realtor to help. You need a team of agents with systems in place to help you resolve this huge mess.
How long does it take to do a Short Sale?
That's the Million $ Question! Let me explain, there are several benchmarks that are involved with the Short Sale process...
1. Step one is making the call, talking to and hiring the Realtor who can help you. Then you call your bank and request an authorization form and name the Realtor you choose to speak on your behalf. This takes a few hours.
2. Step two- is when the Realtor you choose comes to your home with the listing paperwork; we look at the current market conditions and determine a price to market your home. This takes an hour or so.
3. Step three- we begin to market your home aggressively to find a ready, willing and qualified buyer who is willing to be patient throughout the short sale process. This can take a few days up to a few months to get an offer. (Current spring market conditions suggest. an offer will come quickly)
4. Step Four-When an offer is received and you and the buyer agree to terms, we then submit the offer to your mortgage company. This is where our expertise in negotiating Short Sales takes place. The actual negotiation/approval can take as little as 2 weeks or as much as 3 months. On average most Short Sales take between 30-60 days from the date the offer is presented to the lender to the date of the Short Sale approval. In most cases, 60-90 phone calls and faxes back and forth between the lender and our group are required. The process is usually not described as "fast" in most cases, but with the right team working on your behalf, you can be at rest knowing that everything is being handled diligently and with much care.
5. Step Five- this is the last stage to the Short Sale process. This is when the bank approves your Short Sale Request and they fax us a letter. At that point is when all parties are notified and things begin to move quickly. Short Sale Letters are typically only good for 30 days. Currently many Loss Mitigation Specialists are stating they want the loan closed within 15 days of the approval. **Keep in mind if we have a government loan buyer (VA or FHA Loan) that is not always possible. We work with the bank to alert them of such speed bumps.
How Do You The Realtor Get Paid- I Don't Have Any Money...
In a Short Sale transaction you, as the seller do not have to pay the Realtor commissions or any of the closing costs; the bank covers all of these costs. However here in Virginia, many banks are not covering the taxes due, HOA fee's that are due or any outstanding judgments. Be open and honest with the Realtor you choose so they can coach you on your options.
Will I have a tax obligation when you I sell by Short Sale?
We are Realtors. We are not tax experts. Please, consult with a local CPA before you enter into a Short Sale.
Keep this in mind when making your decision, in 99% of the cases the amount of the loss at a Foreclosure is greater than that of a Short Sale. That is due to all the court costs and attorney fee's and carrying costs. Most people don't realize that the mortgage company (or servicing company) still has to pay the carrying costs to the investor until this home is SOLD. That's why they call Foreclosed Homes REO Properties it means Real Estate Owned. Banks do not want to have these on their books. If you are going to receive a 1099 in either case, it is in your best interest to do a Short Sale instead of allowing your property to be sold for less at Foreclosure or as an REO (Real Estate Owned or Bank Owned Property). Now that you know this, don't allow rumors and incorrect information influence an important decision in your life. Losing your home to Foreclosure is always the last resort, you families financial health can recover from a Short Sale in a few years, however with a Foreclosure on your credit report you will subject your family to higher interest rates, and lack of buying power for a decade or more. This is why you should seriously look at all of your options before letting your home go to Foreclosure.
How is my credit affected by a Short Sale?
We get this question everyday. There are so many variables. However keep in mind we are a FICO Score driven society. Once your mortgage goes 30+ days behind, your bank has the right to report it the credit bureaus. This directly impacts your credit standing. If you are truly facing a hardship...you will be late on your mortgage. My advice is what doesn't kill us makes us stronger. You will live. And recover in a few years.
When the actual Short Sale is completed, most banks will report to your credit report that your account was "paid in full for less than the full amount". You credit report may also be marked as "settled". It is important to keep in mind that each lender has a different way of reporting that a Short Sale was done, but this is the most common language that is seen. If your home were to go to Foreclosure you would most often see the bank report "Foreclosure" on your credit report. All lending experts agree both a Short Sale and a Foreclosure will affect your credit however a Foreclosure will last the longest.
I firmly advise you to work with a Credit Scoring Expert to help once this is all over
Why would a bank grant me a Short Sale?
It is much more cost effective for a bank to do a Short Sale rather than Foreclose on a home. Banks are not interested in owning real estate. Banks make their money from receiving monthly mortgage payments. While banks will take a loss during a Short Sale, they can after minimize their loss by as much as 10-20% over a Foreclosure.
When should I consider doing a Short Sale?
Ideally we would like to begin working on your Short Sale as soon as you recognize that you are unable to keep up with your payments (read more here) and will be falling 30+ days behind. The important thing for you to know and keep in mind is that the sooner we begin working with you on the short sale process, the more you increase your chance of a successful closing.
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If you cannot see in the future that things will improve, now is the time to act. Call us today 703-590-2252.
