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Give your stress away, we are here to help. FREE!Short Sale Answers
· What are short sales?
A short sale in real estate occurs when a lender agrees to accept a discounted payoff on a loan. In most cases, the home owner owes more on the property than the the home is currently worth. This occurs only when a home seller qualifies for a short sale through proving a hardship.
· Why is it to my advantage to do a short sale?
A foreclosure can impact your credit far more than a short sale, especially in the long term. In fact, some banks don't report a short sale. In addition, in the event of a foreclosure, in many states the lender will seek a deficiency judgment in the amount you owe. They could even come after other properties and assets of yours, including vehicles. Your credit could recover from a short sale in less than two years, whereas a foreclosure or bankruptcy can take 7-10 years. A short sale by itself will likely lower your credit score by about 50-120 points. The hardest hit to your credit score typically comes from missed mortgage payments rather than the actual short sale itself.
· Can I get any money back from a short sale?
As part of the Making Home Affordable Plan, and specifically the new Home Affordable Foreclosure Alternatives (HAFA) initiative recently announced November 30th, 2009, qualified home owners can get money BACK from a short sale to use towards relocation expenses! Some lenders are offering even more! Call for more information on this program.
· How can the Short Sale Specialist Network help me?
We are short sale Real Estate agents and Realtors throughout the United States who are specialists in working Short Sales in our local areas. We help home owners by working with your lender to negotiate a lower payoff amount in order to price your home below competition and get it sold. Our agents will also aggressively market your home to attract buyers and oversee the entire sales process of your home. These services are at no cost to home owners. Only the best and most experienced agents are able to stay in our network. A weekend or online short sale training designation does not make someone an "expert." The average agent within our network has closed over 50 short sale transactions.
· What are the qualifications for a Short Sale?
The main qualification for a short sale is that you are in some type of "financial hardship." This can include: loss of employment or income, divorce or separation, relocation or job transfer, major illness and medical expenses, high dollar repairs without the resources to make them, increased bills or higher living expenses. A good rule of thumb is that a short sale is not for those who simply "want" to sell, but only for those who "have" to sell. You typically must prove your inability to pay your mortgage each month, however many lenders have become more lenient and will make exceptions sometimes for homeowners who are not even in hardship.
· What if my home is worth more than my loans, but I could not pay the closing costs?
You can still short sale your home. Many homeowners in the country have avoided adjusting the price of their home to current market value in a desperate attempt to receive enough money back to pay off their loan balances and closing costs. If this is you, you are just delaying the inevitable as home values continue to fall across the country. In a short sale, we charge all traditional sellers' closing costs to the lender!
· If I sell my home short, can the bank come back after me for the money?
Not in most cases. We will work to get a full release for you at closing. This release will fully forgive any deficiency between the amount you owe, and the proceeds from the sale of the home. You should consult an accountant regarding tax ramifications, especially if it is an investment property. Depending on the state in which you reside, some laws forbid banks from attempting to collect deficiencies under certain circumstances.
· Who will pay the Realtor commission?
Your lender pays the commission. They pay a regular Real Estate Brokerage fee, just like a home seller would in a traditional transaction, and just like they would if they foreclosed on your home. Again, you pay $0 out of pocket, period.
· How much work will this take?
Not much for you. We will ask you to gather certain financial information and forms for us to present to your lender. Our agents will handle the negotiations and details with your bank as well as the process involved in selling your house.
· What happens to the money that is forgiven from my lender?
Any balance shortfall on your mortgage will likely be written off as a loss by your lender. Because of this, your lenders may also send you a "1099" for any amount forgiven. Due to the Mortgage Debt Relief Act of 2007, you are NOT required to pay taxes on this money if you short sale your primary residence prior to 2012. Consult your accountant with any other questions regarding this.
· If I am going through foreclosure, can I do a short sale?
YES! In fact, the bank will likely be more than happy to work with you on a short sale. It is to the bank's advantage as well as yours to work out a short sale. The foreclosure process costs a lender on average $58,000! In addition, too many foreclosures look bad to a bank's investors.
· Can I stay in my house until the short sale is completed?
YES. You will not have to move out until the closing. In fact, if you are facing foreclosure and we are actively working with your bank, we can typically get your lender to delay the foreclosure proceedings and make it possible for you to stay in the home for some time.
· Will the bank continue their collection activities?
Yes, the bank will continue its collection activities. That may mean they will call you or send you letters looking for a payment even if you are currently pursuing a short sale. However, most banks will not foreclose on your home if you are actively working on the short sale.
· What if the terms of the short sale given by the bank are unfavorable?
If the terms of the short sale are not in your best interest, you are not required to sell the property and complete the short sale. Do remember though that a short sale will have the lender forgive you of the debt and is the best option to avoid foreclosure or bankruptcy and will have the least negative effect on your credit. If you choose not to do a short sale the bank will NOT forgive you of the debt and may continue to pursue you for the outstanding loan balance.
· Are there any dangers to be aware of when working a Short Sale?
Be careful of scam artists or shady individuals if you are in financial hardship or facing foreclosure! These sharks can cause more harm than good. Never sign a quit claim deed, power of attorney or an "option contract" without consulting an attorney and experienced agent. A good rule of thumb to understand is that anybody trying to purchase your home will look out for their own best interests in the transaction, NOT yours.
· Can my current Realtor work a short sale on my home?
Unfortunately not in many cases. While there are many agents that list short sales, most lack the knowledge and experience necessary to properly execute one. A short sale is NOT part of the Realtor "basic training." Even most agents with CDPE (Certified Dist. Property Expert) or other Realtor® designations are inexperienced with them. The results can be disastrous! An experienced Short Sale Realtor knows how to make deals happen, when inexperienced agents make foreclosures happen. Only the best and most experienced agents make it into our network.
What a loan modification is all about?
Loan modification is the process of a lender agreeing to change a part or some parts of your loan terms in order to make it easier and more affordable for you to repay your mortgage loan. This option allows you to keep your home by making regular payments. If you are only behind on your mortgage payments because of a single incident or a problem that can easily be resolved, then loan modification is a better choice. However, this also means that your loan terms are extended, which results in a longer period of paying for the loan interest.
The Differences and the Advantages of a Short Sale VS Loan Modification
Before you make a decision on whether to choose a short sale VS loan modification, or vice versa, you need to understand the differences between the two first. Taking a closer look at these differences will help you find out which is the better option that best suits your preference, your needs, and your current financial situation. This will also assist you in making the wisest choice.
One of the major differences of a short sale VS loan modification is that you no longer have to worry about paying more on the mortgage of your property. Since you are signing away your contract and the ownership of your home, this means that your remaining mortgage balance is already paid for and can be forgiven.
Another difference and advantage of a short sale VS loan modification is that you do not have to keep paying for the interest rate on your loan. Once your property has been sold through a short sale process, you no longer have to worry about interest rates or other fees. On the other hand, with a loan modification, you are extending the terms of your loan, which means that the longer your payment terms are, the more interest you have to pay for.
Another advantage of a short sale VS loan modification is that the lenders are giving you the chance to recover from your financial hardships. With a short sale, you can walk away from your debts and not owe your lenders any more money. With a loan modification, you still owe your lenders a significant amount of money that they expect you to return. Aside from the mortgage balance you still owe them, you also have to pay for interest. This is not beneficial to the borrower if they are in a negative equity position. Having a loan that is greater than the value of the property is not beneficial, regardless of the interest rate or terms.
Few loan modifications offer permanent solutions. The best analogy for this situation is like putting a band aide on a hemorrhage. The loan modification is many times only a temporary solution, and are usually just an attempt to buy more time in the property.
Since you will be given the chance to get out of the financial pinch that you are in if you put up your property for a short sale, this means that within a couple of years, you will be able to afford purchasing a new home. This new home may even be better than the property you put up for sale. This is one of the advantages of a short sale VS loan modification, since with the latter; the value of your property may further decrease over time.
Now that you have a basic understanding of the differences, the benefits, and the advantages of a short sale VS loan modification, you may now choose which one is the best option for you.
For more information on short sales contact a specialist today!