Information about Short Sales in the Tulare, Visalia, Exeter area. What is a Short Sale? How does a Short Sale work? Do I qualify for a Short Sale? If I dont have a hardship do I still qualify for a short sale?
Tuesday, May 7, 2013
Short Sale Questions and Answers
What is a Short Sale?
A short sale in real estate is a special sale of a home where the lender is paid an amount that is LESS than the current mortgage balance owed on the home. This can only be done when the lender agrees to the lower sale price when the seller proves a hardship has created the need for this arrangement.
Who qualifies for a Short Sale?
Generally a Short Sale is granted by the lender to homeowners who have experienced a financial hardship that prevents them from continuing to pay on the mortgage. Rather than foreclose on the home, which is a huge expense to the lender and very devastating to the homeowner's credit, a Short Sale may be done instead.
Some of the common hardships that lead to a Short Sale are: loss of a job; a serious illness; divorce; financial stresses from liens or delinquent taxes; or even the death of a spouse or loved one.
Will I receive any money at the closing of my home?
Generally no, however a new program (HAFA) may allow the homeowner to receive $1,500 to be used for relocation expenses. As of November 30, 2009, the Home Affordable Foreclosure Alternatives Program can offer some assistance to help with moving costs.
Who will pay the realtor’s commission and the seller’s closing cost?
Your lender pays both the realtor fees and closing cost in order to avoid a more costly foreclosure.
Is the seller responsible to pay any fees to Tulare County Short Sale Team if the home does foreclose?
No. is only paid a commission when the house is sold.
Would it be easier to let my home foreclose?
On one hand, yes it is easier because the seller really doesn't need to communicate as often with the lender. However, there are some potentially damaging consequences. In some states, a lender may seek a deficiency judgment following a foreclosure to try to get back the money you still owed on the home. The lender may then try to place liens on other properties, garnish your wages, or even repossess vehicles to recoup their losses. This is why a Short Sale may be a better option for a distressed homeowner in that a deficiency judgment and the negative consequences might be avoided. For more detailed information, seek advice from your CPA or legal counsel.
What is the seller's advantage for doing a Short Sale?
Well, one of the best reasons to do a Short Sale is to try to avoid a lender from pursuing a deficiency judgment against the homeowner. The next reason is preserving the homeowner's credit.
Both a foreclosure and a short sale will negatively impact a homeowner's credit, however a foreclosure is much worse. A person's credit may recover in 2 years with a short sale, but a foreclosure may take up to 10 years. This will hurt the person's ability to get a new home loan and will put him or her in a high risk category causing much higher interest rates. It could also impact career choices as many employers now check a person's credit report as part of the hiring process.
Will filing for Bankruptcy affect a short sale?
Yes, if you have put the home under bankruptcy protection then the home cannot be sold as a short sale until the home is released or discharged from the bankruptcy. Notify your real estate agent to discuss the options available to you.
Why do banks and lenders accept Short Sales?
At first it seems hard to believe that a bank would be willing to so deeply discount the sale of a home until you look at the situation from their perspective. If a bank forecloses on a home they must repossess it, make repairs, change the locks, and pay for a variety of legal fees. A short sale often costs less than what it costs to foreclose on the home, so the bank has actually saved money. Another reason is that in this distressed housing market with so many foreclosures, the bank doesn't want too many foreclosures (or bad debts) on their books. This prevents them from borrowing more money from the Federal Reserve, so they are unable to give out new loans to increase their revenue streams.
How long does a Short Sale take?
How long it takes will depend on what state you are in. In Georgia, a typical short sale may take from 2 to 4 months. Some reasons why short sales take longer than conventional home sales is that there is more paperwork involved and the process is delayed when short sale paperwork is missing or incomplete. Sometimes overwhelmed lenders will reject offers for this reason and the process must be started over from scratch. This is one reason why it is important to use someone familiar with the short sale paperwork for that lender in order to avoid having a file closed or any unnecessary delays.
What is needed from the seller to process a Short Sale?
Each bank or lender may have their own specific requirements for its Short Sale paperwork (packet). However, there are some general requirements such as: a hardship letter (explaining why the homeowner can no longer pay the mortgage); financial statements (monthly income & expenses); tax returns for the last 2 years; bank statements for the past 2 months and a pay stub for the past 30 days. Lenders also may want the realtor's listing that shows the property listed at the current fair market value.
A short sale in real estate is a special sale of a home where the lender is paid an amount that is LESS than the current mortgage balance owed on the home. This can only be done when the lender agrees to the lower sale price when the seller proves a hardship has created the need for this arrangement.
Who qualifies for a Short Sale?
Generally a Short Sale is granted by the lender to homeowners who have experienced a financial hardship that prevents them from continuing to pay on the mortgage. Rather than foreclose on the home, which is a huge expense to the lender and very devastating to the homeowner's credit, a Short Sale may be done instead.
Some of the common hardships that lead to a Short Sale are: loss of a job; a serious illness; divorce; financial stresses from liens or delinquent taxes; or even the death of a spouse or loved one.
Will I receive any money at the closing of my home?
Generally no, however a new program (HAFA) may allow the homeowner to receive $1,500 to be used for relocation expenses. As of November 30, 2009, the Home Affordable Foreclosure Alternatives Program can offer some assistance to help with moving costs.
Who will pay the realtor’s commission and the seller’s closing cost?
Your lender pays both the realtor fees and closing cost in order to avoid a more costly foreclosure.
Is the seller responsible to pay any fees to Tulare County Short Sale Team if the home does foreclose?
No. is only paid a commission when the house is sold.
Would it be easier to let my home foreclose?
On one hand, yes it is easier because the seller really doesn't need to communicate as often with the lender. However, there are some potentially damaging consequences. In some states, a lender may seek a deficiency judgment following a foreclosure to try to get back the money you still owed on the home. The lender may then try to place liens on other properties, garnish your wages, or even repossess vehicles to recoup their losses. This is why a Short Sale may be a better option for a distressed homeowner in that a deficiency judgment and the negative consequences might be avoided. For more detailed information, seek advice from your CPA or legal counsel.
What is the seller's advantage for doing a Short Sale?
Well, one of the best reasons to do a Short Sale is to try to avoid a lender from pursuing a deficiency judgment against the homeowner. The next reason is preserving the homeowner's credit.
Both a foreclosure and a short sale will negatively impact a homeowner's credit, however a foreclosure is much worse. A person's credit may recover in 2 years with a short sale, but a foreclosure may take up to 10 years. This will hurt the person's ability to get a new home loan and will put him or her in a high risk category causing much higher interest rates. It could also impact career choices as many employers now check a person's credit report as part of the hiring process.
Will filing for Bankruptcy affect a short sale?
Yes, if you have put the home under bankruptcy protection then the home cannot be sold as a short sale until the home is released or discharged from the bankruptcy. Notify your real estate agent to discuss the options available to you.
Why do banks and lenders accept Short Sales?
At first it seems hard to believe that a bank would be willing to so deeply discount the sale of a home until you look at the situation from their perspective. If a bank forecloses on a home they must repossess it, make repairs, change the locks, and pay for a variety of legal fees. A short sale often costs less than what it costs to foreclose on the home, so the bank has actually saved money. Another reason is that in this distressed housing market with so many foreclosures, the bank doesn't want too many foreclosures (or bad debts) on their books. This prevents them from borrowing more money from the Federal Reserve, so they are unable to give out new loans to increase their revenue streams.
How long does a Short Sale take?
How long it takes will depend on what state you are in. In Georgia, a typical short sale may take from 2 to 4 months. Some reasons why short sales take longer than conventional home sales is that there is more paperwork involved and the process is delayed when short sale paperwork is missing or incomplete. Sometimes overwhelmed lenders will reject offers for this reason and the process must be started over from scratch. This is one reason why it is important to use someone familiar with the short sale paperwork for that lender in order to avoid having a file closed or any unnecessary delays.
What is needed from the seller to process a Short Sale?
Each bank or lender may have their own specific requirements for its Short Sale paperwork (packet). However, there are some general requirements such as: a hardship letter (explaining why the homeowner can no longer pay the mortgage); financial statements (monthly income & expenses); tax returns for the last 2 years; bank statements for the past 2 months and a pay stub for the past 30 days. Lenders also may want the realtor's listing that shows the property listed at the current fair market value.
Short Sale Benefits
Short Sale Benefits
Direct: (559) 967-4422
Questions: TulareCountyShortSales@gmail.com
Here are a few benefits for doing a short sale that may not have occurred to you:
• You are in control of the sale, not the bank.
• You may sleep better at night knowing who is buying your home.
• You will spare yourself the social stigma of the "F" word, foreclosure.
• Contrary to popular belief, you can be current on your payments and still affect a short sale.
• Your home sale will be handled like any other home sale.
Buying Again After a Short Sale
If your payments have never fallen behind 30 days late and the lender does not require that you pay back the loan, Fannie Mae guidelines may allow you to buy another home immediately. The wait for an FHA loan is 3 years.
If your payments are in arrears yet a short sale is granted by your lender, you may qualify to buy another home with a Fannie-Mae backed mortgage within two years, regardless of whether the home is your primary residence.
Buying Again After a Foreclosure
With certain restrictions, you may be eligible to buy another home in 5 years if the home was your primary residence. Without restrictions, the wait is 7 years.
If you are an investor and do not occupy the home, the wait to buy with a Fannie Mae insured loan is 7 years.
Affects on Credit after a Short Sale
A short sale is not a derogatory mark on your credit because credit bureaus do not show the word "short sale" on your credit report. It may say "pay as agreed" or "paid as less than agreed," among other categories. Some clients have reported negative FICO score drops from 50 points to 130 points.
The point drop is typically due to being in default that is behind on your payments.
Affects on Credit after a Foreclosure
A number of sources have reported FICO score drops from 200 to 400 points after a foreclosure. Generally this credit score will remain on your credit report as a public record for 10 years.
Credit Reports after a Short Sale
All lenders report short sales differently and some do not report them to the credit bureaus at all.
Credit Reports after a Foreclosure
If a prospective employer runs a credit check on you, your job application may be denied if you have a foreclosure on your record.
Deficiency Judgments after a Short Sale
Judgments are often negotiated between the seller and the short sale bank. In some cases, such as California, if the home is your personal residence and was financed through purchase money, there is no deficiency judgment.
Deficiency Judgments after a Foreclosure
Banks are unwilling to negotiate deficiency judgments with the homeowner after a foreclosure. In California, for example, according to the California Association of REALTORS, a deficiency judgment may be filed regarding a hard-money loan if the lender forecloses under a judicial foreclosure versus a trustee sale or if the second loan is a hard money loan and the sale takes place as a trustee's sale.
Loan Application Questions after a Short Sale
Loan applications do not ask questions about a short sale. You may report that you sold your home.
Loan Application Questions after a Foreclosure
You are required to answer the question: "Have you ever had a property foreclosed upon or given a deed-in-lieu thereof in the past 7 years." If the bank sees you have had a foreclosure, your loan most likely will be denied. If you lie, you may be subject to investigation by the FBI for mortgage fraud.
Length of Time to Move after a Short Sale
If you've had a foreclosure notice filed, you may be able to postpone that action while the bank considers your short sale. The wait for short sale approval can be from 2 to 3 months, or longer.
Length of Time to Move after a Foreclosure
Unless prior arrangements have been made, the bank may want you to immediately vacate the property and can commence eviction proceedings.
Taxation after a Short Sale
A personal residence is exempt from mortgage debt relief until the end of 2012 on a federal level. Some states will still tax you unless you qualify for an exemption. An investor is not exempt from mortgage debt relief, subject to certain conditions.
Taxation after a Foreclosure
Same as with a short sale. Except some lenders immediately send out 1099s, even if the owner is exempt.
In closing, always obtain legal and tax advice before making a decision between a short sale and a foreclosure.
If you have any further questions click on the live chat above or call below
Jeremy F. Garcia
REALTOR
Certified Short Sale Listing Agent
Direct: (559) 967-4422
Email: jeremygarcia.realtor@gmail.com
DRE Lic# 01418546
Who will pay the short sale Realtors® commission?
In a short sale it is customary for a lender to cover all fees associated with the sale of the property, including your short sale specialist as well. In almost all cases, a home owner in hardship will pay no out of pocket expense to complete a short sale transaction.
Jeremy F. Garcia
REALTOR
Certified Short Sale Listing Agent
Direct: (559) 967-4422
Email: jeremygarcia.realtor@gmail.com
DRE Lic# 01418546
Is it possible for me to get money back for completing a short sale?
Until recent times, it was almost unheard of for a home owner to get money back in a short sale. Things have changed for the better. The HAFA program, backed by the US Government, allows homeowners $3,000 to use towards relocation expenses. In addition, some lenders will offer generous incentives of their own in addition to money offered through the HAFA program. We have seen home owners get as much as $35,000 back to complete a short sale.
Do I have to pay for someone to negotiate my short sale?
No. You don’t have to pay to sell your home on a short sale. The commissions paid to real estate agents come out of the banks proceeds. Some states allow for short sale negotiators to collect a special fee for negotiating a short sale that will be separate from a real estate commission. It is beneficial but not necessary to hire a specialist to handle your short sale. They can often be paid by the buyer, bank, agent or the seller.
Can the bank come after me for a defeciency judgement? (California)
Can the bank come after me for a defeciency judgement? (California)
Below is a summary of recent changes to California State Law by the California Association of Realtors that affects banks ability to come after borrowers for deficiency judgements.
SB 931
(eff. Jan. 1, 2011)
Discharge of balance of loan indebtedness after a short sale for residential 1-4 real property by holder of a first deed of trust
This new law prohibits a lender holding a first deed of trust (purchase money or refinance) for a dwelling of 1-4 units to demand a deficiency judgment (unpaid balance due on the loan) from the trustor or mortgagor (owner) who sells the dwelling for less than the remaining amount of the indebtedness due at the time of the short sale to which the lender has consented in writing.
However, if the owner commits either fraud with respect to the short sale, or waste with respect to the secured real property, then the lender may seek damages and use existing rights and remedies against the owner or any third party for fraud or waste.
Note that this law doesn't apply if the trustor or mortgagor is a corporation or political sudivision of the state.
Adds Section 580e to the Code of Civil Procedure.
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