With the national housing market in crisis, we are seeing homeowners turn to short sales as a solution to avoid foreclosure. In this article, we will answer the 10 most frequently asked short sale questions we receive from clients. We encourage you to explore all of your options to avoid foreclosure by learning as much as you can about each option and talking to qualified people who can help you decide what is best for you and your family.
Now, let’s answer some questions!
1. What is a short sale?
A short sale is when a homeowner owes the bank more than the home is worth and the bank agrees to sell the property for less than what is owed. For example, if your outstanding mortgage balance is $500,000 but your home is only worth $300,000, then you’re upside down and you can do a short sale to get him out of the property.
two.Why would a lender accept less?
A lender or bank accepts a discount or agrees to accept less because it saves them money in the long run. It removes bad debts from their books so they can reinvest that money by making another loan to a customer. In many cases, a short sale is necessary to get out of your mortgage debt. By doing a short sale, you will be able to take a large portion of the money you owe to your mortgage company so that you are no longer responsible for the full amount.
3. What is needed?
First of all, you need a qualified and professional short sales agent who knows how to handle this special type of transaction. Your agent will know how to properly prepare the financial package for the bank.
Each lender or bank has their own set of required information and some may even have a set of documents specific to them. In general, most banks require at least the following:
- adversity card
- financial statements
- 2 year tax returns
- 2 month bank statements
- 2 month pay stubs
- Profit and loss statement (if self-employed)
Additional documentation may be required throughout the process, so make sure you have everything on hand.
Four.How long does a typical offer last?
Depending on which state you are from, this answer will vary and the timeline is subject to your lender or bank. Many banks are currently overwhelmed with short sale requests, however most have a comprehensive review process. Unnecessary delays can be avoided by not sending incomplete short sale packages. Incomplete offers are often overlooked or rejected. Your file is then closed and you would have to start over from the beginning. It is very important to make sure you provide everything required by your lender and requested by the person helping you negotiate. On average, we see most of these deals close in less than 90 days.
5. How much is it?
Unlike a traditional real estate listing where you pay an agent a commission to sell your property, in a short sale transaction the lender pays the commissions, so there are no out-of-pocket costs to you.
6. How long until you can buy another house?
There are new loan programs designed to help people who have recently had to short-sell their home. You can apply for a home loan in as little as two years, as long as you’ve maintained your credit in good payment history, kept your debt-to-income ratio within lending guidelines, and have verifiable income.
7. What qualifies as a hardship?
There are many types of difficulties that can be considered valid. Here are some:
- Mortgage Rate Adjustment
- Increased monthly expenses
- i need to move
- reduced income
- Unemployment
- Health problems
- Separation or Divorce
- medical bills
- business failure
- Cuts or reduction of companies
- Death of a spouse
- A valid reason why you cannot make your mortgage payment
8.
Can I short sell an investment property or a second home?
Absolutely. It’s a common misconception that people think they can only short sell their primary residence, but this is not true! You can short sale your main home, all of your investment properties, and even your second home.
9. What about my credit score?
There is a lot of misinformation about credit scoring. You’ll definitely want to find a credit expert to learn more about your situation. When talking to credit experts, most agreed that while a short sale will likely affect your credit in some way, it won’t be as affected as a foreclosure would be. A good credit repair company can negotiate any damaging comments on your credit report. By doing a short sale, you can prevent foreclosure from haunting your credit for years to come.
10. Who can do a short sale for me?
You’ll need a well-qualified real estate agent to help you prepare all the paperwork, list your property, and navigate the negotiations for you. We also strongly recommend that you consult with a qualified tax attorney, certified public accountant, and real estate attorney regarding any future ramifications.
