A short sale is when the lender allows you to sell your house for less than what you owe. Lender's prefer it to a foreclosure which is a legal process for them to take back the title to your house. Foreclosure can take up to a year after you stop making payments and will cost the lender more than if you participate in a short sale. Below I have answered several important questions about the foreclosure process and what the term "short sale" means.
Q. When does the lender realize that there is a problem?
A. As soon as you are 30 days late, the lender will call and send collection letters. At 90 days late most lenders will file a "lis pendens", a written notice that a lawsuit has been filed concerning real estate, involving either the tiltle to the property or a claimed ownership interest in it. Since this action lets the public know of your problem, you will start getting calls, letters and people at your door. Don't panic and get taken advantage of.
Q. What if the problem that got you behind on the payments gets solved quickly, like your lost your job and found another one right away?
A. You can do a loan modification which is a permanent change such as: 1. A reduction in the interest rate; 2. Forgiveness of a portion of your principal; or 3. Extension of the maturity date of the loan or similar combination. For example..if you have a 30-year mortgage with payments you cannot afford, your lender may change your mortgage to 40-years and lower the interest rate giving you payments that you can afford. This all depends on your lender. One of the best programs is the FHA Streamline Option.
Q. If you can't make your payments what should you do?
A. Don't ignore the problem! If you don't participate, the process will move on without you and do more damage to your credit and future employment. Call a Realtor who can negotiate with the bank for you and get paid by the bank when they sell your house. Never pay anyone upfront to help you!
Q. What is the difference between a foreclosure and a short sale?
A. There is a huge difference. If you allow yourself to be foreclosed on you won't be eligible for a new Fannie Mae or a government backed loan for five years. Your credit score will be lowered by as much as 250 to 300 points. The foreclosure will remain on your credit history for 10 years or more and the bank has the right to pursue a deficiency judgment, which means if your home is sold for less than what is owed on the mortgage, you may be liable for the balance due.
A foreclosure can also affect your current and future employment. If you are in a sensitive job like bank teller or cashier, the military, law enforcement or work for a government contractor that requires security clearance, you could lose your job or be prevented from getting one due to a foreclosure. Like a felony, a foreclosure follows you for many years.
In a short sale a homeowner who successfully negotiates and closes a short sale can get a new government backed mortgage in two years, not five. The credit score can go down as little as 50 points not 300. A short sale is not reported in a credit history so it's not a challenge to current or future employment. It's possible to convince the lender not to pursue a deficiency judgment against you. In a short sale your home should sell sooner which will result in a lower deficiency.
Q. I've heard the term "Short Sale flipping" What does that mean?
A. A short sale flip is when an investor negotiates a short sale with a bank and then sells that home to a new buyer for more money within a day or two making thousands in profit. A short sale flip usually involves fraud on the part of the investor, Realtor, Appraiser, Lawyer, Title company or even the new lender. The seller and their lender, the buyer and the new lender are all losing to the scammers collecting dishonest fees and profits. When a legal, successful short sale is facilitated the Realtor's fee will be paid by the lender on the homeowner's behalf along with the other usual seller costs.
Q. What can a seller do to help their Realtor sell their house sooner?
A. First don't abandon your house and second, we Realtors say: "It's a price war and a beauty contest!" The Realtor will help you price the home correctly but the owner has to make sure that the home looks and smells good. Lenders will only accept a short sale contract from a professional Realtor, after time on the market showing this is the highest and best price available. Realtors assume the burden of communicating with the lender. As skilled negotiators we attract and package offers acceptable to lenders and present them on your behalf.
Q. How do you recognize the scammers and fraudulent people?
A. They ask for money up front, they ask you to sign a deed or other paper that gives them title rights to your property. What they promise sounds too good to be true. They pretend to have special skills and connections. Once they have control of your property they can evict you and lease your house to someone else, collecting the rent and not paying your mortgage. Unfortunately there are a lot of bad people giving bad information.
If you find yourself or someone you know in this situation perhaps, I can help. I handle all of the paperwork and assist you with the process. You get a quick response with no hassles, no pressure, and your worries will be behind you. Don't wait until it's too late! You deserve a fresh start!
I am not able to help everyone, but I will try! Call me today to find out how I can help!
You have the right to know all of your options. Call April Solomon/Realtor/GRI with I Net Realty Group, Inc. at (727) 809-0475. Time is of the essence so call today for more information.
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