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.
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