Broker of Record
Exit Realty Group
An Alternative to Foreclosure
Help For Those Upside Down on their Homes
How can I get out from the financial devastation and obligation of my home ?
If the market value of your home is less then what you currently owe your lender, you may be eligible to qualify for a "short sale". A short sale may be attained by negotiating with your current lender an acceptable sale on your property to a third party for less than what you currently owe on your mortgage balance.
Short Sales have become more of a necessity in today's market and a much better alternative to foreclosure or even bankruptcy. Lenders are more receptive to accept Short Sales for a variety of reasons. It's a win-win situation for all parties involved.
The Seller wins by obtaining a general release of the home and often with a complete personal release. Your property is saved from foreclosure, thus lessening the damage on your credit rating. (Foreclosure may adversely affect your credit up to 7 years.) Moving on in your life without the embarrassment of public notice of eviction and foreclosure, plus maintaining your self-esteem, is obviously beneficial.
The Lender wins by avoiding timely and additional expenses a foreclosure process would create and possible carrying charges.
The Buyer wins by purchasing a home at an excellent market value.
Lastly, your neighbors benefit with a Short Sale versus a foreclosure on the block which creates further adverse results in market values.
- What is a Short Sale ? A form of agreement between the owner of the home and your existing lender; "pre-foreclosure", allowing the home to be sold for less then what is owed to your lender. Your lender would accept less then the loan amount in order to avoid a foreclosure proceeding. The Short Sale would result in a substantial discount price for the buyer.
- How do I know if I am eligible for a Short Sale ? There are a few factors required in determining the decision to qualify for a Short Sale. One is the nature of your hardship; the financial status of your debts versus your assets and your loan to value, or in today's market better described as your "remaining value to your loan amount."
- What documents will I need to proceed in a Short Sale ? The documents will vary slightly depending on the lender. Most commonly requested is a hardship letter, outlining the nature of your circumstances, (I highly recommend a licensed realtor with experience dealing with lending institutions marketing your home. Plus a proven successful track record on short sales), an Authorization Letter allowing the professional representing you, an active multiple listing agreement, A signed valid sales contract, preliminary HUD1 settlement statement, financial statement on the owner/seller. ie; pay check stubs, bank statements, monthly budget assessment amongst other items.
- Will my credit rating be affected by a Short Sale ? The individual lender may vary in their reporting on the credit. Often what is on the report is "paid", however, they may record "settled for less then originally owed" or similar, although much more advantageous to have a Short Sale referenced than to have a foreclosure posted. In addition, less damaging and quicker to cure on your FICO scoring.
- Will I receive any proceeds from a Short Sale ? The seller is not going to make a profit from a Short Sale. Inevitably the profits and/or benefits were received through out the time you resided in your home. The marketing expenses paid to a licensed real estate broker and legal costs of an attorney representing you during the process are paid through the settlement costs with the lender. Generally, there are no out of pocket costs for the seller for these fees.
- Will the lender require an appraisal on a Short Sale ? Most lenders require a full appraisal or a BPO (Broker Price Opinion) to determine an assessment of the value in today's market. This evaluation will assist them with their decision to accept or reject the Short Sale. (This is another area extremely important to have an experienced agent representing you in negotiating with your lender for a short sale resulting with more favorable outcomes.)
- Are there tax implications in a Short Sale ? Similar to the credit reporting, circumstances are individual to the lender. As a Short Sale represents a loss for the lender, they may report the amount of loss debt forgiveness to the seller. Previously, if a formal tax form 1099 was filed, a seller most likely would be responsible for paying taxes on the amount of debt forgiveness. I would recommend speaking with a Tax Accountant who is professionally trained in this field.
- Can I do a Short Sale myself ? I sincerely recommend a licensed realtor with the background and experience in Short Sales. Often when doing this yourself the stress and emotions make it more difficult to reach the right departments for your loan, negotiate a favorable outcome and lastly the time and patience to achieve the appropriate results.
- Can I use any attorney to represent me with a Short Sale ? Make absolutely certain the attorney representing you practices in real estate Law primarily and has diligently been involved in the process of a Short Sale and Real Estate closings in general.
- Why would a lender allow a Short Sale ? Putting it simply, it benefits all parties involved. The seller gets out from under the financial obligation they can no longer afford. The Lender is saving on a costly foreclosure and the additional marketing expenses once it becomes "Bank Owned" and the buyer purchases the home at an attractive price.
Should anyone you know be facing the unfortunate hardship of potentially losing their home a short sale is a method to help you get out from under should you qualify. Feel free to call me at any time to discuss your options confidentially and a free consultation to evaluate your situation.
You owe it to yourself to move on to a less stressed life style to begin a new with a salvaged credit score. If you have any questions call our908-303-0478 and we will help you.
Our team of experts is here to assist you with questions you may have.
The Somerset Hills Real Estate Team.
For more information about Exit Realty Group, please call 908-303-0478. Exit Realty Group is located at 10 Anderson Road, Bernardsville, NJ 07924