Frequently Asked Questions
1.What is a short sale?
A short sale is when the amount owed on the loan(s) is more than the house is worth at current market value. The lender agrees to take a reduced payoff. The goal is for the lender to record the mortgage as satisfied. The best part to you is your lender pays virtually all the sales cost involved. You have your loan paid off and have not suffered a foreclosure.
2.Is a Short Sale a good idea for me?
Mortgage lender(s) are willing to work with borrowers in financial hardship and are willing to take reduced pay-offs. If you are having a financial hardship your lender(s) are going to prefer to settle the matter through a short sale rather than a more expensive and difficult foreclosure procedure. Remember your lender is looking to limit potential losses with your property, and they know by completing a short sale they have a solution for them much better than foreclosure. We have found lender(s) do want to work with us.
3. How much will I have to pay to short sale my house?
Absolutely nothing is the general truth. If your lender approves the short sale they pay the attorney fees, commissions, title and escrow costs. Remember the lender approves the short sale because they are looking to avoid a more expensive and difficult foreclosure process.
4. How do I get started if I choose a short sale?
It is very easy. You simply need to contact us. We can do the preliminary work online, if you are comfortable sharing personal information in an electronic format. We can set up an appointment to take a look at your options and help you decide which are best for your family and situation. There is no charge to you to get started. You simply contact us and we get to work. There is no pressure from us, we are all professionals who work only upon your request.
.5.What are hardships the lender will consider?
The general answer is, as long as the mortgage company believes the hardship is real and they believe it is likely the loan will default as a result, the Loss Mitigation Department negotiates a short sale. These are the most common hardships:
- Family illness or an injury which affects income.
- Illness or injury in your extended family, particularly if you have to relocate.
- Job relocation and the property value is deficient.
- Job loss or significant loss of income.
- Divorce
- Adjustment of mortgage payment or an unforeseen increase in expenses.
6. I am current on my mortgage is a short sale a possibility?
Yes, it is possible. Some lenders will consider a short sale on mortgages which are current. There are lenders who will only consider a short sale if the payments are delinquent. We can put together a short sale file and submit it to the lender(s) for approval. We do not charge for this. That will be the best way to determine if your lender will consider the short sale.
7. Why would my Lender agree to a Short Sale?
Mortgage lenders are under legal pressure to work with borrowers to resolve situations where they are not able to make their payments. Especially when the borrower has attempted a compromise solution.
- Legal Concerns
Mortgage lenders are under legal pressure to work with borrowers to resolve situations where they are not able to make their payments. Especially when the borrower has attempted a compromise solution
- Asset Management Expenses
If the lender acquires a property through foreclosure they must manage the property until it is resold. This is very expensive for banks to do. They have assets spread throughout the region, the state and even the nation. They must keep the properties maintained, the utilities on, make repairs, and there are administrative costs attached to these responsibilities which the lender would prefer to avoid. By agreeing to a Short Sale they avoid these issues.
- Wall Street is Watching the Banks
Mortgage lenders rely on their ability to package and bundle loans to sell on the secondary market. They must sell these bundles in order to put the money back to work by loaning the money again and collecting the fees. If mortgages perform badly after they are sold it impacts the lenders ability to find investors on the secondary market. By agreeing to a short sale the loan pay off is resolved swiftly.
- Reserve Requirements
Lenders must place funds aside in reserve for all delinquent and non-performing loans. These funds can not be used to generate new loans, they are simply held in reserve until the bad loans are resolved. Short sales are a way for the bank to get their money working for them again quickly.
8. Are all Short Sales Approved?
It is critical for you to work with professionals who are experienced and have extensive knowledge of the process, since many short sales are not approved. We know how to present the short sale package, to negotiate with the Loss Mitigation Department, and we know how to keep the file moving towards approval. We will help you get started and there is no charge for this
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9. Is it a problem I have two mortgages?
We will work with both lenders in order to put together a short sale transaction. Even if the value of the house on the current market is beneath the value of the first loan only, the two lenders will normally cooperate with us. The bottom line is neither lender wants to own a home through foreclosure.
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10. My property needs some work; it is in a bit of disrepair, can I still short sale?
Absolutely, the lender knows their risk of loss goes up with properties in need of repair. They are not in the business of doing home repairs; they are not set up to handle this issue, and will not want to foreclose since they will lose even more money. They prefer the short sale.
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11. How will a short sale affect my credit?
By any measure, a foreclosure is the most devastating thing that can happen to your credit. Foreclosure is worse than bankruptcy on your credit. In the course of getting the short sale approved you may miss a few payments, and this is far easier on your credit. There is a possibility of negotiating with the lender satisfaction of mortgage without having to be late. The lenders are different in the way they approach this issue.
12. Can I deed the house to someone else and not have this worry anymore?
This is almost always a bad idea. If the loan is not paid off the lender considers you primarily responsible for the payment on the loan. When you deed your property to someone else you give up control of the property. This should never be a consideration without an attorney consultation.
13. What makes a Short Sale not likely to happen?
- If the home is a second home or a vacation home.
- Very recent cash out refinancing of the home or the seller has recently obtained a Home Equity Line of Credit (HELOC).
- If the seller has filed for bankruptcy protection under Chapter 7 or Chapter 13.
- If there are more than 2 to 3 liens on the property.
- The seller wants to receive money from the sale with lender(s) taking a discount on the payoff. Seller can receive no money.
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