|
|
| Short Sale Basics/Process |
|
 |
What is a Short Sale?
A short sale takes place when your bank agrees to sell your home for less then what you owe on it. For example, you purchased your home for $275,000 a couple of years ago and today it's worth $190,000. Because the proceeds from the sale will be short of what is owed, your lender must review and approve the deal, thereby creating a short sale.
Who Qualifies for a Short Sale?
In order to qualify for a short sale, you must be able to demonstrate financial hardship to your lender. By hardship, it means: a decrease in pay, death, divorce, illness, your interest rate has adjusted, mounting credit card debt, or any change in circumstances that is making it difficult to pay your mortgage. Your hardship does not have to be horrific to be acceptable - almost any hardship is acceptable.
What Are The Benefits of a Short Sale?
There are many benefits to pursuing a short sale:
 |
You can remain in the property during the sale |
|
You may be released from the liability of the loan |
|
You may have time to make other living arrangements |
|
You avoid having a Foreclosure on your credit history |
|
You will be eligible to purchase again after 2 years (per Fannie Mae Guidelines) where you can't purchase for 5 years with a foreclosure (per Fannie Mae Guidelines) |
|
If the property is your primary residence, you may have NO tax consequences |
|
Doesn't cost you ANYTHING, the bank pays all realtor fees |
How Should I Choose a Realtor?
Just because someone has a real estate license or is a Realtor, does not mean that they are the best choice for your short sale. To put it politely, most realtors are not equipped with the skill sets necessary to successfully negotiate a short sale. That fact is evidenced by the national average for successful short sales is just above 20%! Scary!
In 2010 our short sale team successfully negotiated 98% of our short sales. We negotiate ALL of our deals "in-house" because we have a vested interest in successfully closing your short sale, where outside 3rd parties just see a name on a piece of paper, they have NO connection to the borrower.
A Short Sale Genius Elite is an agent who has participated in an intensive training from both a former bank loss mitigator with 20 years asset management experience and a broker whose brokerage has negotiated several hundred short sales in the past 3 years. A Short Sale Genius agent has been given exclusive access to bank insider information, systems and processes to better serve the client in a short sale transaction. Short Sale Genius agents have access to both the bank loss mitigator and broker to assist them in closing their transactions.
A Short Sale Genius Elite has successfully closed between 15 and 39 short sales and is in the top 9% of real estate agents in the Nation.
Below are a set of questions that you should pose towards any realtor that you are interviewing:
|
How many properties have you listed as short sales? |
|
What percentage did you successfully close? |
|
How many short sales do you currently have listed? |
|
Do you negotiate your own sales or use a 3rd party? |
|
Are you Local? It is very important your agent knows your current market conditions |
|
Do you have a support staff to assist you? |
|
What specifically qualifies you to negotiate MY short sale? |
|
Do you come with References? |
What Are My Other Options?
You have several other options, each with it's own pluses and minuses
Refinance: If you have equity in your property, then you may be able to qualify for a refinance. In some instances, you may qualify for a mortgage up to 105% of the value of your home.
Modification: This is where your lender may adjust your interest rate to make your home more affordable. In some instances, your bank may reduce the principal amount owed to help achieve a more affordable payment.
Deed in Lieu: This is where you voluntarily give your property back to the lender without going through a formal foreclosure process. It's much quicker than foreclosure, but is very damaging to your credit.
Short Sale: This is when you sell your home for less then what it is owed on it. For example, you owe $350,000 on your home and it is now worth only $300,000.
Do Nothing: You always have the option of doing nothing and just letting the bank foreclose. This is highly discouraged and will affect your credit for years to come. We strongly suggest that you do not just "do nothing."
How Does a Short Sale Benefit the Bank?
A short sale benefits the bank in many ways. According to the Joint Economic Committee of Congress, the average foreclosure costs $77,935 while preventing a foreclosure runs about $3,300. So it's easy to see why a bank would want to pursue an option like short sales.
How is My Credit Affected?
While It's impossible to predict the exact number of points that you score will drop because of a short sale, you can certainly plan on your FICO score taking a hit. With that said, the damage to your credit will be less severe with a short sale then it would be with a foreclosure. A foreclosure is a permanent mark on your credit!
What Are the Costs?
The best part about a short sale is that all realtor fees, closing costs, past due taxes and other fees associated with the closing of the property will be covered by your bank, you do not have to pay any of these fees. The rules are that the seller can receive NO compensation from the realtors or any other party because the bank is agreeing to accept the sale at a loss.
What Are the Tax Implications?
In certain circumstances, their may be tax consequences, but since we are not licensed CPAs we recommend that you consult a licensed tax professional to obtain advice. However, here is a link to the Mortgage Forgiveness Debt Relief Act of 2007. We encourage you to review that information for a better understanding of who will and who will not have tax consequences. |
|
|
 |
|
|
|
