**************************************************************** How a Short Sale Benefits a
Homeowner
and Realtor!!
News for You
One reason why there are so many short sales on the market today is because so many homeowners are under water. This means that a homeowner purchased a home for a price that is higher than what the home is worth now. This means that if the homeowner is behind on their mortgage, they will not be able to refinance.
For example, John Smith bought a house for $300,000 in 2004. Today, because of the declining market, his home is only worth $260,000. John has an ARM that recently adjusted and he can no longer afford his monthly payments. He is facing foreclosure and cannot refinance because he does not have enough equity in the home and the home is not even worth what he originally paid for it. His only option is to try and sell the home for what the market will allow and negotiate a short sale with the bank so they essentially take what they can get for the home. This will allow John to satisfy his agreement with the bank, save his credit and one day own a home again.
The bad news is: Short Sales and Foreclosures are both going to have a negative impact on your credit report. A foreclosure and a short sale can even look about the same on your credit report. It's devastating. But, if you can negotiate a Short Sale quickly and successfully, you can minimize that negative impact significantly.
Here’s what Elizabeth Weintraub has to say on About.com:
In most cases, a Short Sale will reduce your credit score by 80-150 points, and it is possible that it may only take you about 18-24 months before you’re able to qualify for another mortgage at ‘reasonable’ rates. When you sell your home via shortsale your credit will show late payments and a "settled for less than owed" BUT will NOT show that the home was actually foreclosed.
As of now current FHA lending guidelines allow home buyers to show a 12 month on time housing history (rental is OK) in order to qualify for a new FHA loan.
This would apply in the case of a few missed payments,2 years for bankruptcy and 3 years for a deed in lieu or a foreclosure. This means in some cases the sellers can qualify for a loan again in as little as 12 months....depending on how many payments are missed and how far behind the seller falls.
This is not black and white, however, and the clock is always ticking. If the short sale takes 6 months and the seller shows payments over 6 months late/unpaid, the bank may consider this to be very similar to a foreclosure.
This is all the more reason for a seller considering a short sale to act quickly.
A Foreclosure will reduce your credit score by 250-280 points, and will require a minimum of 36 months before a mortgage at ‘reasonable’ rates is accessible, though if not FHA, most conventional programs require 4 years or more, for additional properties even as long as 7 years..
With a short sale, the biggest benefit is that you sell your home and if you don't satisfy the mortgage amount the bank may forgive the deficiency. A short-sale is positive for both the lender who doesn't have to go through the process of foreclosing and the homeowner, who may be able to walk away without a huge amount of debt.
If you simply walk away, your house will be sold at auction, and if the amount it's sold for doesn't satisfy the mortgage, you'll be on the hook for the deficiency. And lenders can go after you for the money including attaching liens on other property you own.
We May Be Able to Help!!
A few benefits for YOU-the seller:
with your Lender at NO Cost to YOU!!
We will contract to buy your house
as part of the Short Sale process!!
We will work with your Realtor!!
Your realtor does not need to talk with the lender!!
Your realtor still receives their commission.
WE DO THE WORK!!
You avoid Foreclosure!!
A few more benefits to the seller are listed below:
********************************************************************************************************************
Seven Reasons Sellers Should Consider a Short Sale
1. Eliminate Contingencies. Distressed homeowners that need to sell a property
fast can certainly benefit from considering a short sale offer. If the short
sale offer is structured and negotiated properly there is no need to wait for the buyers to obtain financing, scheduling inspections and possible repairs and other time consuming activities while the clock is ticking away and the homeowner is struggling to make payments or facing bankruptcy.
2. Fewer Fees. In most cases, short sales result in fewer fees. Real estate
agents, brokers and others typically must show a home many times before
obtaining a valid contract but in the case of a short sale everything is
streamlined.
3. Forget Fixes. If your property isn't in tip-top condition homeowners are
normally required to spend even more money to bring the property up to par in
order to show it. Distressed homeowners may not have the necessary funds
required to make costly repairs or upgrades. Short sale properties are typically
sold "as-is" further reducing the out of pocket costs for sellers.
4. Avoid Foreclosure. Short sales may allow a distressed homeowner to avoid
foreclosure or even bankruptcy by working out an acceptable deal with the bank.
5. Preserve Confidentiality. Distressed homeowners are understandably reluctant
to have their financial status shared with peers, family and friends...a short
sale helps avoid bankruptcy, foreclosure and other embarrassing legal
proceedings.
6. Fresh Financial Start. Depending upon the individual circumstances
surrounding the short sale, the distressed homeowner may be in a better position
than ever by eliminating debt and making a fresh financial start including the
ability to qualify for a new home purchase in 2 years rather than 5 as in the
case of a foreclosure.
7. Forego Mortgage Payments. It is often possible to forego mortgage payments
while negotiating the terms of a short sale - further eliminating financial
pressure on a distressed homeowner.