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Short Sale Sellers Can Turn Into Short Sale Buyers Within Months

Yes it’s true ... Short Sale Sellers Can Turn Into Short Sale Buyers Within Months!

This afternoon, I followed up on the progress of one of my Short Sellers ... post-short-sale.

We closed the first week of January 2010 ... slightly more than 2 months ago ... and already they have a few good things to report.

Did I say ‘good’? I meant to say ‘fantastic’.

He took the LSAT, came through with flying colors, and will soon be applying to law schools in the Orlando area.

She secured another job after being laid off for nearly a year.

Their FICO score got knocked down a little, but even so, they can qualify for an FHA loan. Now. Today. Right this minute. Less than 2 months after closing on the Short Sale.

They’re ready to buy again, and they intend to purchase a Short Sale with the goal of getting the same kind of deal the buyers of their former home got. They probably won’t get serious about buying for a few months yet, but I’ve already set them up to receive regular notifications of listings in the new neighborhood of their choice. They already know how a Short Sale works, so they’re prepared for the wait. Only this time, it will be from the other side of the transaction!

And they lived happily ever after ...

* * * * *

JUDY CHAPMAN | Live the life you dream

Residential Sales ∙ Luxury Sales ∙ Short Sales

Koenig & Strey | 1925 Cherry Lane | Northbrook, IL 60062

Judy@ChgoNorthShore.com | Office: 847.749.3811

Up until a year ago, I sold real estate in Orlando FL, explaining why you’ll see many, many posts related to the Orlando real estate market. Now I’m back in ‘Sweet Home Chicago’, selling real estate in the North Shore and West of North Shore Suburbs.

If you’re interested in relocating to Florida, contact me for recommendations of some very fine Realtors^® all over the state. I can also refer you to some of the hardest working Short Sale real estate agents throughout the country.

Posted by Judy Chapman on 03/11/2010 08:38 PM

Comments (55)

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55 Comments on Short Sale Sellers Can Turn Into Short Sale Buyers Within Months

MAR

2010

FINALLY! Someone is writing about the fact that being a Short Sale seller is not the end of the world.

On rereading the post, I don't see that they have been pre-approved.

I'll be interested to see how that works out.

That is outstanding ! Congratulations to your buyers/sellers...there IS life after a short sale !

Hope it works. Like Lenn I am curious about the lender approving them and I hope they do. Please update us also about how the short sale was reflected on the credit report. Was it marked paid as agreed, etc. That will be interesting and would inidcate if lenders are loosening their risk assessment guidelines.

Judy,

That is good news! However, in most cases, people are forced into doing a Short Sale because of a bad, escalating interest rate and most banks will not work with the current home owner to reduce them to market value. Neither the interest rate nor the principle. The reason they want the owner to do a Short Sale is because our government has ALREADY bailed them out, giving them the difference of all toxic loans in the bank's portfolio. That is way very few do the RIGHT thing and re-adjust the owner into an affordable situation. So an Investor buys it from the bank for cash and resells it to an end user. The bank gets the difference from a Short Sale or Foreclosure from our Government and then the banks "double dip" and sue the people "personally" after they took the home away for for any deficency and/or reports them to the IRS for capital gains taxes. So the homeowner is a VICTIM X 3!!!

Our Government Bailed out Banks and Corporations owned by Heaven knows who in this world (mounds of layers like an onion) protecting them and NOT it's PEOPLE!

These Thomas Jefferson's words were written over 300 years ago. I believe we are innocent targets and as a Nation have been quite naive. (My Blog)

Thomas Jefferson's Prophetic Thoughts and Warning in Regard to the Recent Government Bail-Out of Banks and Corporations Rather than it's People are Eerie and True with the Millions of Foreclosures, Bankruptcies and Homeless Citizens.

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

Thomas Jefferson, (Attributed)
3rd president of US (1743 - 1826)

Lenn - I almost feel like a proud mama bird sending her chicks out into world. This young couple regretted so much having to give up the first house of their married life together. It's really nice to know I can help them find their second house! BTW, they called me based on a Short Sale blog I wrote here on ActiveRain, and just 10 minutes after it was posted!

Sally & David - Yes, I've always heard about 'life after Short Sale', and this proves it! Thanks for the re-blog!

Judy, please keep us posted. It is fantastic news as you said. I would like to hear how the preapproval goes.

Kris - There are so many people hiding inside homes they may soon lose. They're scared ... really frightened ... about the future. This is just one story of homeowners who didn't have to be so scared because now they have hope, and their future is brighter than they could have imagined just a few months ago.

Now, if banks would only approve more loan modifications, these sellers would not have to move in the first place. I tell my short sale sellers that what they are basically doing is trading their home for another with half the mortgage. Whether they buy immediately or wait a couple of years.

I know FHA has new guidelines for this, but I've not yet seen any buyers approved for an immediate purchase. Please post another blog if and when these guys get through underwriting. We'd all love to read a story of success. Fingers crossed for ya, Judy, and your buyers, too!

Joe & Suzanne - While I'm no credit expert, I can only see their credit report improving as time goes by. At the moment, they're being cautious since they're renting a house and have several months left on the lease. They have also lowered their sights to a smaller house, not that their previous house was all that big, just purchased at the height of the market.

Elizabeth - Banks ought to bring back Shared Appreciation Mortgages and refinance all those loans to market value. Too easy, huh?

Judy,

Greatfully this particular couple (no kids) were not severely affected as sadly so many families have been when FORCED to uproot their happy, accomplished and thrieving children out of their school and neighborhood and having to moving into limited housing scenerios with vulnerable situations away from a well known community and the only social network many children have had since birth.

Few if any can find a "like" house for rent with limited inventory and excellent credit needed to qualify as a tenant in desirable properties.

This social transition should not be dismissed as trivial and we will not fully know the long term affect this will on families with children suffering the loss of their home until years down the road.

An Investor buys/sells a HOUSE. A Family losses a HOME and many times their COMMUNITY regardless whether it be through a Foreclosure or Short Sale. Please let us not morally deceive ourselves on the devasting impact this will have on the 25% of families that are currently living within this nightmare.

Kris Fox

Good luck, I hope it works out.

I am a little conflicted about it though, I have to admit. I know every situation is different so I won't pretend to know the ins & outs of this particular couple.

But in some instances of short sales, aren't people bailing because of a loss in equity or bad financial decisions of their own relating to the type of mortgage they selected or the amount of money that they financed?

I must always play DEVIL'S ADVOCATE in every situation so spare me the arrows!

I am just happy to see something positive resulting from a short sale transaction.

May you have many more good experiences.

Jerry

Jenna - This couple's problem stemmed from job cutbacks, but since they're both back on their feet, the world is, as they say, 'their oyster'.

Jerry - Once the economy turns around and unemployment begins to abate, I truly believe there will be many more wonderful stories like this one.

Judy,

I'm rooting for them and you! It is lovely to hear of folks getting back on their feet.

Hi Judy, that is wonderful news to say the least! Nice to hear something positive in the world of short sales! :)

Wow...that's amazing. I'm assuming they did not have 6 months of not paying their mortgage prior to the short sale, but that's good news about the FICO. I thought that they needed to wait 2 years for lenders to lend to them again....what do you know about that?

I had a client call me yesterday and tell me that her equifax score is at 717! She short sold her property in August of 09!! She has quite a few other lines of credit that she kept current and they are pulling her score back! I have also heard about the 2 year wait period that Karen is referring to...but not sure about the details!?

Judy,

That is great for you and the people you serve. We should all look at this as a positive experience and a great way to help others. Keep us posted and may your business grow from being a good servant.

Judy - this is great news! I too am curious as to whether or not the lender can truly pull this off. PLEASE keep us posted.

This is great news to hear. I know of many couples who would buy, but were told they would have to wait 2 years for it to pass on their credit reports.

Maybe I missed it in the earlier posts, but did the Lender fund their loan?

Hello:

This is awesome news! My brokerage has done hundreds of short sales, but I don't think this has ever come up before. I'll check it out.

Judy, thanks for the post. It is nice to let sellers know there is short term hope.

I didn't think they could get approved to buy again, especially not in the first year, right????? It's good to put them on the automatic emails and to stay in touch, but hey...

Keep us posted on how this turns out. The local lenders I have spoken with here in Cape Coral, FL have all told me it will take a minimum of 2 years before anyone that short sales will be able to get a loan regardless of their credit score. I think it would be great if they could buy within a shorter period of time if they can show they have gotten back on their feet.

I also have heard they would have to wait 2 years to buy. Myth or reality?

Interesting post and comments. Its good to know that the credit score seems to bounce back well after the short sale. Please let us know if your sellers turned buyers are able to get preapproved.

Thanks for sharing this positive information! How great for your Sellers turned Buyers! They are fortunate that you are their Realtor!

Thank you fro sharing that information, It's great to hear some good for the sellers truned to buyers. Love it!

Judy,

Thanks for sharing that there really is a " light at the end of this dark tunnel"!

Here is the FHA Mortgage Letter that will answer your questions:

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-52ml.pdf

If they were current on their mortgage when they did the short sale they will be eligible for a new FHA mortgage sounds like almost when they qualify with a lender.

But if they were not current on their mortgage the new rule is 3 Years from the date of short sale closing - 1 year up from the previous rules.

It's very interesting to read the actual letter vs. getting information from 3rd parties.

Good luck to your sellers!

Judy- Yes, short sale sellers can get FHA financing right after a short sale as long as they were current on their mortgage and for relocated for a job or other good reason to have to move. They are NOT going to approve them for doing a strategic short sale and then buying the same house across the street just to get out of their mortgage so mostly those sellers buy first and then short sale their house.

Judy- Your header is AWESOME! I love the bright colors and Orlando For Sale is perfect, perfect font, etc! Great job!

Evelyn - Your link is the perfect confirmation. Since my happily-ever-after couple weren't delinquent and had nearly perfect credit scores up to the short sale, they're in good shape.

Thanks, Katerina, for your backup opinion. And a BIG THANK YOU regarding the header. It was designed by ... ta-da ... me. I sorta like the font, too! ;-)

Sharon - I was fortunate to have them as sellers. They cooperated every step of the way and never lost hope, which is so important. I also had a great buyer's agent at the other end who kept the buyers in tow until the end.

Judy

Wonderful news, l believe this is possible as well

Awesome to see - this is the information that sellers considering a short sale need to see. Great for you to help them.

Nice to see someone dispel the myth that a short sale wrecks credit for 7 years and causes blindness and vertigo.

That's great news but how are they qualifying for a government program only 2 months after closing on a short sale. I thought they basically had to accept a 24 month "lose a turn"...

Great story! Thanks for sharing.

Judy,

It was great to read this blog. If people doing a short sale can remain logical and rational about this and not give up hope, it makes all the difference in the world. Thanks for sharing this story.

Cal

Great story! So glad for them, and you!

Judy - This is the first post I've read about a short sale seller becoming a short sale buyer, that's great news.

I guess the key point is that they were not late on their payments when they did a short sale.

Judy, that's incredible! I had heard that you could qualify for a new FHA loan 24 months following a short sale. Is it strictly credit/job driven without any other requirements?

MAR

2010

That's the first time I have heard of that occurring. Wow!

Very nice, concise and positive message on your post Judy. . I'm re-blogging you!

That sounds good, however, I thought Fannie Mae would not allow another purchase for 2 years after a short sale? 5 years after a foreclosure. Have they actually seen a lender to get pre-approved? I would be curious to see if this works out. Keep us posted..

Kim --This is from Fannie Mae Announcement 08-16:

If a borrower has completed a short sale and was never delinquent on that mortgage and is now attempting to purchase a new primary residence, will Fannie Mae purchase the loan?

If the borrower is purchasing a new property and the previous mortgage history complies with our excessive prior mortgage delinquency policy and does not have one or more 60-, 90-, 120-, or 150-day delinquencies reported within the 12 months prior to the credit report date, the loan is eligible for delivery to Fannie Mae, provided the lender or servicer who completed the short sale has not entered into any agreement that obligates the borrower to repay any amounts associated with the short sale, including a deficiency
judgment.

It looks like my happily-ever-after couple can qualify for an FHA loan today and, if their credit score recovers over the next few months, a conventional loan then.

Judy,

This is great news but please beware. I am a mortgage banker in PA and while the FHA will under the right circumstances insure that loan my company (like many others) does not sell directly to FHA. We sell to Wells Fargo, Bank of America and others. The investors we deliver loans to treat short sales as foreclosures. Make sure you ask the lender their experience with this. In the past 3 years my business has picked up an additional 20 loans a year from lenders who provided a pre-approval that they could not deliver on. Make sure your great news does not turn into bad news.

Good Luck!

Hey Judy: I have not found a single bank that will fund a Fannie Mae loan immediately after a short sale, regardless of Fannie Mae's guidelines. I've given this guideline to buyers who have given it to their mortgage brokers, but investors won't touch it. So, while it's nice that Fannie Mae says it will do a loan immediately for sellers-turned-buyers who have not been late or have less than a 60-day delinquency, banks aren't doing it.

Now FHA comes along and says it, too, will allow a loan immediately after a short sale, providing the sellers were current without any delinquencies. But until a bank agrees to fund it, it might not happen. I think FHA has a better shot at attracting investors for this scenario than Fannie Mae, though.

Thanks for this post - what a nice twist - usually there's not much good news about short sales!

MAR

2010

Hey Judy: I came back here to tell you that I have found a lender that will fund an FHA loan to a buyer who sold as a short sale seller. It's Flagstar Bank. Minimum credit score is 650. I had a seller close his short sale on October 30th, and he closed on a new home December 30th through Flagstar, utilizing FHA financing. He was never late on a payment.

Judy, we should all be writing more stories like this! It will allow us to build more hope into our short sale sellers. I've been negotiating short sales for REALTORS in Michigan since 2006 and have seen this story dozens of times, and I too have failed to share these success stories. Thanks for doing that!

Elizabeth - Thanks! I'm sure there are other banks, as well. I also believe the list will have to grow. There's no sense in painting Short Sellers with a broad brush when, often enough, the only mistake they made was buying at the top of the market and couldn't sell the regular way when life intervened.

Joel - Yeah, things are gloomy, but we have to look for the bright spots. Life goes on. For the better, more often than not. Or so we have to believe!

MAR

2010

WOW! Checking back in and seeing Evelyn's link and Elizabeth's news as well. This is great news for those who were in a position to keep paying. Another reason to be grateful for this AR community. How long would it have been before I found this news out?

Judy, were your sellers able to do this with a small boutique bank? I'm surprised we aren't all in therapy with this lending roller coaster!

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Judy Chapman

Northbrook, IL

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Koenig & Strey Real Living

Address: 1925 Cherry Lane, Northbrook, IL, 60062

Office Phone: (847) 272-0330

Cell Phone: (847) 859-9197

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