Short Sale Q & A

 

What is a Short Sale?

 A Short Sale occurs when a homeowner sells a home for less than what is owed on the loan and the lender agrees to accept the agreed-upon amount.

 

What are the benefits of a Short Sale?

 Avoid foreclosure and its many negative consequences:

 1. Credit Score: through successful short sale, a homeowner avoids foreclosure and its huge hit to his or her credit score. A foreclosure will stay on homeowner's credit report for around 7 years.

 2. Future loan with mortgage company:  a  homeowner with successful short sale avoids higher interest rate when they apply for loan in the future. Standard mortgage application asks if an applicant has ever had a property foreclosed in the last 7 years.

 3. Credit History: foreclosure remains as public record permanently while a short sale is not reported on credit history. Instead the loan is typically reported as 'paid in full, settled'.

 4.Future Employment: more and more employers are performing credit check on applicants and foreclosure is detrimental to a credit report.\

 5. Deficiency Judgement: In states with deficiency judgement, the bank has the right to pursue defficiency judgement on owner of foreclosed property. In a short sale, the homeowner has a chance to negotiate how the debt is settled or has a chance to negotiate a lower deficiency through his/her real estate agent.

 
 

 How long will it take to get lender's approval on a short sale?

 Short Sale is a complex and lengthy transaction. Approval can take months. Patience is key. A home may go in contract 2 or 3 times because first and second buyers get impatient and walk away from the transaction.



Will sellers earn money from the sale of their home?

Not even a penny. Lender is taking a huge loss on the property and they will make sure that seller is not taking advantage of the situation and not getting any proceeds from the sale.



How do I know if I'm a good candidate for a Short Sale?

-You must demonstrate a hardship. Example of hardship includes divorce, job loss, pay cut, illness or death in the family, higher mortgage payment.

- you must be in financial difficulty or financially insolvent. The lender would want to know if you have other assets/ saving you can sell to help pay for the mortgage.

- your properties must be upside down or under water. By definition, your mortgage balance must be larger than the current value of the property before you can call it a short sale.

- you need to cooperate with the real estate agent, the lender and other parties through out the entire short sale process.