|
What is a short sale?
A short sale is the sale of a home in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the process of the sale and forgive the rest of what is owed. There must be some type of hardship for a lender to accept a shot sale. By accepting a short sale, the lender can avoid the lengthy and costly process of foreclosure, and the owner is able to pay off the loan for far less that what they owe.
How does a short sale process work?
Mortgage companies are not in the business of owning real estate, they are in business to lend money. Therefore, most lenders look at different ways they can collect on the debt. The lender will take a lot of factors into consideration in making a decision to accept a short sale.
They will look at the borrower’s situation, their hardship, current local markets, cost of foreclosure, cost of handling the property after foreclosure and many more.
After reviewing all the factors, if the lender authorizes a short sale, they will have the property appraised and will determine a price they will accept. This price is not always given to the REALTOR® or home owner.
When an offer to purchase the property is made, the home owner will negotiate with the Buyer and then final approval will come from the lender. After the home is sold, the home owner is released from all their obligation of the loan even though the lender did not receive payment in full.
One very important thing to remember her is that the home owner will most likely receive a IRS-1099 for the lender showing the difference between what the lender received and what the home owner owed. There could be tax ramification with this. Please seek the counsel of an accountant for your personal situation.
Will a short sale affect my credit?
Yes, more than likely it will. It is very important to remember that this option is better on your credit than a foreclosure. With today’s sub prime lender situation, it is becoming more difficult to purchase a home after a foreclosure. You should start to rebuild and repair your credit immediately after the short sale is complete. I recommend that you check you credit on a regular basis which you can do free online.
What do I have to do to participate in a short sale?
The first thing you need to so is contact the loss mitigation department of your lender. Next is to contact a REALTOR® to set up an appointment for them to go over your personal situation.
After contacting a REALTOR® there are several steps we will have to take.
This process can take some time, as much as 30 days before the lender authorizes the short sale. Your home must be listed with a REALTOR® during this process to be approved.
How much money will I receive from the short sale?
By its nature, you will not receive any money from the proceeds of the sale. There are some situations where you will be paid by the lender to take care of the property. If you have an FHA loan, they may pay you up to one thousand dollars for this. Check with your REALTOR® and lender for further information.
How much money will come out of my pocket in the short sale?
NONE! The bank will pay all the fees from the proceeds of the sale. Again, just as you will not receive and money, you will not pay any money out.
If you have any further question on this process, or would like to have a free personal consultation, please feel free to contact me any time.
|