The Short Sale

~The New Exiting Strategy

For all the homeowners who are upside down and can no longer make their mortgage payment (because of either a job loss, divorce, or an option ARM that’s resetting higher), up to now the only option was, well, letting the bank foreclose. That’s not a good option since a foreclosure sticks on your credit record for at least 10 years.

What is a Short Sale?

Short sales, in which a lender and borrower reach an agreement to dispose of a property threatened by foreclosure at a price that is "short" of the amount owed on the mortgage, and the remaining balance is forgiven.

Short Sale Example

A homeowner facing foreclosure has an existing first mortgage of $300,000. In today’s market, the house is now worth $200,000. A buyer willing to purchase at today’s market price, enters into purchase agreement. Lender approves terms and accepts as full payment for the loan. In most cases you are not out of pocket a dime as the lender will absorb all of your closing cost including commissions.

Why are banks willing?

Banks could lose a lot more money if the property goes to auction with so many fees involved. They would be better off taking the discount beforehand and be finished with the headache of it all. they also do not want an excess inventory of bad loans on thier books. So, if there is the opportunity to sell and the numbers make sense, they will do it.

New Incentives from Uncle Sam

The Treasury Department is getting in on the act by substantially increasing incentives to lenders and services that use short sales Funds would only be allocated if the lender opts for short sales over other means and methods of removing the asset from their book. It appears the plan will provide an additional $1,000 for lenders who agree to a short sale. Borrowers will receive $1,500 toward closing fees and second lien holders would receive $1,000 once they sign away their claim to the short sale. Depending upon the total cost of the property, this is a significant incentive package that could assuage the fears of servicers and lenders.

Other Incentives/Tax Breaks

There has been major change in tax rules stating that you do not owe income tax on the amount owed or forgiven for a primary home bought between 1/1/97 - 12/31/09. It is recommended that you seek final advise from your tax professional.

Short Sale Approval Process

I have had an amazing success rate with short sales, even if there are multiple loans or equity lines of credit involved. All your closing should are negotiated upfront and covered by the bank including commissions and such. This process should cost you Nothing

The Lender will require for your property to be placed on the Multiple Listings, which means you will need my services as your realtor. We will negotiate with the bank for you and have the direct relations with the banks to typically have a short sale acceptance within 1-2 week after listing the property.

The Lender will require Hardship explanation and Letter, income substantiation, bank statement, pay stubs, income statements, and so on. We will help you put your packet together for submission.

It usually takes 3 weeks or more to get an answer back from the lender, so you can't afford to wait. If the auction is approaching, we will ask to have the auction extended which in most cases they will, depending on the timing and if they know it is a legitimate offer.

The Lender will then order the BPO. This stands for Brokers Price Opinion to determine the current value of your home. The BPO process review can take anywhere from 2-3 weeks. A final decision from the Negotiator is ready, and this can take anywhere from 3 weeks to up to 7 months in some cases.

Advantages of a Short Sale

In some of these cases, a short sale is often the best solution for you to get out of your bleeding situation, while minimally affecting your credit and avoiding foreclosure and the stigma that surrounds it.

~Let's weigh out the facts:

Ruined Credit VS Bruised Credit

Short sales show up on a credit report as a "pre-foreclosure in redemption" status and can result in a credit score reduction of 100 points or less. After the sale, the mortgage may show up as "discharged." People who successfully complete a short sale may also qualify for a mortgage at a reasonable interest rate in as little as 18 months. So, if buying a home is a future goal, then a short sale is the better option for many.

Buy again in 12 – 18 months VS. Up to 10 years

With a foreclosure showing up on your credit report it will be very difficult if not almost impossible to buy anything on credit. No house, no cars, no credit cards, large deposits for utilities and so on. With a short sale your credit will suffer but it has been our experience for those clients who are able to show 12 months of good credit history that banks and lenders are willing to extend credit once again.

Negotiated Settlement VS Court Ordered Judgment

Once the foreclosure process is completed the court will issue a judgment in favor of your lender. This judgment will show up in the public records and on your credit report. A short sale is a negotiated settlement between you and your lender. No need to worry here I will actually be the one who will negotiate for you but obviously a settlement is much better than a judgment.

No Cost to You VS Fees Large Attorney Fees

In order to facilitate a foreclosure action against you your lender will need to hire a law firm. The law firm will charge thousands upon thousands of dollars to handle the foreclosure, which will be added to the amount you owe the lender. A short sale will cost you nothing to facilitate. In fact, I will handle the entire process for you at no cost to you. How? Your lender will pay my commission once I find a buyer for your home. Even if you owe more than your home is worth I can sell it and your lender will pay all of the fees involved at absolutely no cost to you.

No bankruptcy needed VS Filing bankruptcy

Many homeowners believe they have to file a bankruptcy in order to protect their home. With a short sale there is no need to file a bankruptcy and further complicate your credit problems.

Peace of Mind VS. No Peace of Mind

A foreclosure will haunt you for up to 10 years or even longer. A short sale will end he process in as little as 3 to 4 months and allow you to get on with your life. It's your choice.

I hope with this knowledge, you now can make the right decision about your home.