I just joined the Blastoff network. It’s fun, free and an easy way to make money! You can have a blast with your own customizable home page; with the best music, videos, games, news and social networking pages.
1. What is a Short Sale?
A short sale is the process by which a homeowner can sell a house for less money than he actually owes on the mortgage(s). This is done by the seller and the listing agent providing proper documentation to the mortgage lender(s) to convince them to reduce the mortgage balance to allow the sale. The mortgage lender (or bank) actually takes a loss (or write-off) on the mortgage because the value of the home has fallen below the mortgage balance AND the homeowner is in a poor financial condition that will not allow him to continue to pay on time.
If the bank approves the discount on the mortgage, the home can be sold for a lower price without the seller having to come up with cash to cover the shortfall, and the mortgage is satisfied and the foreclosure process stops.
2. What type of situation is the short sale best for?
Most short sales are done on properties in foreclosure. This means the homeowner is at least 3 payments behind and the foreclosure suit has been filed by one of the mortgage lenders. Recently, more mortgages that are simply behind or "in default" are considered short sale candidates without actually being in foreclosure.
Also, the homeowner typically has negative equity or no equity in the home. In other words, the total balance owed on the mortgages is equal or greater than the price at which the house can be sold. This situation is growing increasingly common due to the easy availability of 100% mortgages (no money down) as well as the recent decline in prices. This is particularly prevalent in the Southern California area, which has a large glut of homes for sale and where prices have declined 10%-30% in the past year.
In addition, the homeowner must have some type of financial hardship that is preventing him from paying the mortgage. This is commonly job loss, medical bills, disability, or some other hardship.
A typical situation for a short sale is this:
-Homeowner purchases a home for $600,000 in 2004 with 5% down payment, the mortgage balance is $570,000.
- By 2005, the home's value has increased and interest rates have declined so the homeowner refinances to pull cash out. Home value $660,000, new mortgage $660,000.
- In 2006, homeowner gets laid off and continues to make payments from savings, hoping to land a new job soon.
- By 2007, savings are gone and still no job. Homeowner begins to miss payments and decides to sell the home for $660,000.
-As the months pass, the home has not sold because values have dropped back to $600,000 and the foreclosure process has begun. The Real Estate Agent presses to lower the selling price to entice a buyer, however that would require the homeowner to come up with cash at closing to cover the mortgage shortfall.
-Homeowner is stuck in the house and the foreclosure is proceeding.
If your situation sounds at all like this one, you might benefit from a short sale, Call Fred Sed at 949-274-3733.
Comments(0)