In today's modern world, it's easy for homeowners to get "upside-down" or into an "equity-deficient" position where they owe more on their mortgage than their home is worth. With rising interest rates, high loan-to-value ratios, higher energy costs, or higher unemployment ratios in certain geographic areas of the country, homeowners can easily find themselves in a tight situation where making a mortgage payment can get harder and harder each month. This situation can end up being a downward financial spiral, yet there are qualified professionals to offer insight and sound resolution practices. After two to three months of missed mortgage payments, the mortgage lender will record a written notice in the county where the property is located, which alerts the homeowner to the beginning stages of the foreclosure process. This recorded notice, whether a "notice of default", "notice of trustee's sale", "intent to sell" or similar, reveals to the world that the homeowner is having trouble making the required payments toward contractual agreement of the mortgage note's. At this stage, the homeowner is now officially in "pre-foreclosure".
Unfortunately, one-half of these homeowners ever even contact their lender in an effort to resolve their situation. This "do-nothing" mentality is a costly mistake that damages both consumer credit scores and borrower personal integrity. A "foreclosure" status on a credit report is far worse than a bankruptcy. Homeowners can simply avoid "foreclosure" by listing the equity-deficient property for sale with a qualified professional. YES! Homes with no equity can be sold on the market! The key is to find a real estate broker or agent who is trained specifically on how to negotiate short sales with the mortgage lenders. Pre-foreclosure situations can be cleaned up quickly if you take action. Foreclosure can be avoided, but you must be willing to take proactive steps to correct and resolve the situation.
What is a Short Sale transaction and how is it beneficial?
A real estate short sale transaction allows you to sell your home on the market - even if you don't have equity. The definition of equity is: A net financial interest in property ownership. You'll need a professional real estate broker/agent who is specifically trained to perform a short sale, because your broker/agent will be negotiating, for your benefit, a discount of the total balance due of your mortgage note with your lender.
This is a great solution for many homeowners because it allows them to get out from under the debt, walk away with head held high, and save credit scores from incredible damage of a "foreclosure" rating.
A short sale occurs in the pre-foreclosure process. Once a homeowner has received a Notice of Default (NOD), he/she has a specified amount of time to cure the default or the lender will start proceedings to foreclose on the mortgage.
A FORECLOSURE is the loss of a right to redeem a mortgage.
A MORTGAGE is a right to conditional conveyance of a property.
A real estate agent, trained in short sale transactions, can list your home on the commercial market, price it accordingly and negotiate directly with the lender to accept a purchase offer for less than the principle, interest and impound account balance's due. It's vital that you cooperate fully with your short sale real estate broker/agent, because he/she is working in your best interest to get the lender to release the mortgage at a discount. Later in this guide, we'll review the documents your broker/agent will request from you.
How a Short Sale affects your credit score vs. a foreclosure
Your credit is most likely a bit damaged at this point. You are three months or more overdue on your mortgage payment. So, there's good news and bad news on this one. A short sale will affect your credit score, but the good news is that it won't be as harmful or long-lasting as a foreclosure.
A short sale is notated on your credit report as a Short Payoff, Settled, Paid, Offer and Compromise. This indicates to lenders that you took action and attempted to rectify the loan obligation. You were responsible, listed your home for sale and took a proactive interest. You will be rewarded for this over a foreclosure.
A "foreclosure" mark on your credit report is a bad sign or indicator to lenders. It puts you in a higher risk category because a "foreclosure" describes you as someone who didn't take any action or responsibility to repair or cure the Notice of Default. Chances are, future creditors will think you have a high risk of "walking out" on your loans again.
The list of documents you need to provide include:
· Copies of your most recent mortgage statements
· Lender's letter of Notice of Default (if available)
· Copies of your most recent tax return
· Copies of your two most recent pay check stubs
· Copies of your most recent bank account statement's
· A hardship letter - written in your own words on what has caused your financial distress
This is why short sales create winning situations for all parties involved:
· the bank wins by avoiding the costly expense of a foreclosure proceeding;
· you, the seller, win by selling your equity-deficient home and avoiding a foreclosure
· the agent/broker wins by getting a commission from the proceeds
· the buyer wins by buying a property with instant equity.
Gary A. Ross
Florida Luxury Home Liquidators
A Real Estate Brokerage Company Specializing in Short Sales
850 NW Federal Highway, Stuart, FL 34994
http://www.floridaluxuryhomeliquidators.com/
Call today, I can help you!! Cell: 772-521-2184
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