A short sale happens when a lender agrees to accept less than the amount owed against the home because there’s not enough equity to cover the loan balance and all of the costs associated with a sale of real property. Legislation is constantly changing in favor of protecting sellers in a short sale transaction. Ask your realtor for details on the latest news in deficiency balance laws. Not all lenders will negotiate with you and/or accept a short sale. That is why it is very important to have an experienced realtor by your side.
The SHORT SALE PROCESS can be a mind-boggling experience. Although short sales have been around for quite a while now, many homeowners and their agents are still perplexed by the process. The mortgage lender generally considers two principles in granting or rejecting a short sale. First, the seller must have some sort of a hardship. Second, is that the seller must owe more on their house then the home is worth. Some examples of hardships that may induce a lender to grant a short sale request include, but are not limited to:
- Reduction in income or unemployment
- Divorce or separation
- Medical emergency
- Death in the family
- Job transfer or having to move out of town
At Boutique Realty we pride ourselves on helping to guide you through this often strenuous process. One of our trusted real estate advisers will help you prepare a financial package for submission to your lender. Many times we are successful in getting our clients $3000 in relocation fees. Some documents that you may want to consider preparing for a short sale include:
- Letter of authorization for your realtor
- Listing agreement
- Purchase contract
- Paystubs and/or profit and loss statement
- tax returns including W-2s
- Bank statements
The short sale process me take some time. It is very important that your listing agent regularly call the bank and keep detailed notes regarding the transaction as it progresses. Often times buyers get tired of waiting for the bank to respond and feel the need to bail on the proposed transaction. Below is an approximate timetable of how long it takes to complete a short sale:
7 to 14 business days for bank to acknowledge receipt of the short sale package
5 to 14 business days for bank to order an appraisal or BPO
14 to 30 business days for negotiator to be assigned
5 days to 2 weeks to receive bank approval
30 to 45 days to close escrow
Short sale and foreclosure effect on your credit
Sellers need to consider the consequences of a short sale and foreclosure. Short sales generally affect your credit rating far less than a foreclosure. Fair Isaac has recently released a report describing the approximate effect on your credit between a short sale or foreclosure. Being 30 days late on your mortgage can affect your score between 40 to 110 points. Being 90 days late on your mortgage can affect your score by 70-135 points. A short sale will affect your score by approximately 80 to 130 points while a foreclosure can impact your score by up to 160 points.
A key difference in a short sale versus a foreclosure is the ability to secure a loan on a new purchase. Having a foreclosure on your credit report can hinder you from securing a new purchase loan longer than it only a short sale appeared on your credit report. Sammy may has recently adopted guidelines that require only 24 months seasoning after a short sale to be able to qualify for new purchase loan. Although Fannie Mae guidelines state that a borrower may immediately apply for a loan after completing a short sale, many lenders will not entertain this type of a loan application.
However, with all this being said an uniformed or a improperly executed short sale could have devastating effects on your credit rating. At Boutique Realty, we specialize in being able to mitigate the damage as much as possible. Real estate agents are not licensed to give legal advice to clients facing foreclosure. Homeowners facing eminent foreclosure should consult a real estate attorney regarding their rights to the property during this process.
Some Key Points to Condsider Before Deciding to Pursue a Short Sale
Market values of homes have dropped dramatically
The mortgage is or will be in default status
You have suffered a financial hardship
Short sale tax consequences if the lender agrees to accept a short sale a lender may choose to issue you a 1099 for the short pay difference. Provisions in the high-risk code that helps homeowners with this tax implication are included in the mortgage forgiveness debt relief act of 2007. Boutique Realty strongly advises you to seek advice of a real estate attorney or tax accountant regarding tax implications of a short sale.
Not Every Real Estate Agent is a Short Sale Expert
Be wary of a listing agent who claims to have short sale experience. A listing agent who is advertising a short sale but has never closed one successfully is a risky proposition. The listing agent bears the burden of facilitating a short sale and playing the middleman between the borrower and the bank. It is imperative that you have an experienced realtor that knows the rules and laws of short sales and short sale deficiencies on your side. Some listing agent hire outside companies to submit the short sale to the lender on their behalf. Boutique Realty does all work in-house to ensure privacy of your personal documents and a speedy follow-up to a successful short sale transaction. Even if the agent is a friend or relative you need to ask yourself if it’s worth the risk of going into foreclosure because you picked an inexperienced short sale agent.
Here at Boutique Realty many of our sales agents have completed courses and earn designations in HAFA short sales and distressed property sales.
Boutique Realty and our team of relocation specialist are here to serve you and provide a smooth transition for your employee and their family. Our realtors have experienced in familiarizing our clients with the area and helping choose the right location to settle. Think of your relocation specialist as your personal real estate concierge. Some of the personal life services include:
- Area counseling
- Community information
- Coordinating travel
- Property towards
- Courtney moving
- Provide transitional support
- Ensuring quality service excellence.
- Purchase and Sale of prospective residences
- Mortgage Services
- Temporary Housing
Free Loan Modification Counseling
Boutique Realty is proud to offer homeowners in default free loan modification counseling services. Homeowners are urged to visit the HUD website at www.HUD.gov for resources about President Obama’s comprehensive homeowner affordability and stability plan. Homeowners may be eligible for a loan modification such as a making home affordable loan modification or refinance to reduce your monthly payments and help you keep your home.
If you need help understanding the making home affordable programs and how to apply for them, contact your local Boutique Realty advisor for free counseling. Our agents are well-versed in making home affordable loan modifications and will do all that they can to help you through the process. If you are eligible for the loan modification or refinance program, your Boutique Realty advisor will work with you to compile and submit a package to your servicer.
Foreclosure prevention services are provided free of charge and we will never ask you for a single penny. There is no need to pay for the services.
Please contact us today for a free evaluation on your eligibility.