Awesome pic by: Jamesterrrr
Agents: if you have something to add/edit, please please do so =)
Home owners: this is my happy rant post, some of the things here may be outdated once you read it. Consult your attorney and/or accountant to get the best picture of the best solution.
Hope it helps...
1. A short sale is any sale of property, usually during the foreclosure process, in which the lender(s) agrees to accept less than the balance due on the mortgage(s) or lien(s) in order to avoid the cost of foreclosure. Per HAFA requirements, the primary lender may not pursue the homeowner, but the secondary lenders do not have to agree to that provision.
2. You cannot do your own short sale. Banks will require you to hire a real estate agent to negotiate their short sales.
3. Advantages of a short sale? You can buy a home a lot sooner; your credit takes a lesser hit than if you foreclose.
4. You can try loan modification yourself! In my experience, banks rarely take the principal down but would most likely work with you in lowering your monthly payments. A lot of people would rather keep their home even if the value of the home is upside down. This is human nature, we have invested a lot in our homes--tears (wives, you know what you did to us...), sweat and and ton of cash. It really is worth trying to keep it.
5. If you've done everything to keep your house, including loan modification, it might be time for a short sale. Choose an agent who has already done a superb job on someone you know.
6. As stated earlier, the BIGGEST benefit of a short sale is your credit takes a LESSER hit compared to a foreclosure. You may be able to buy a house a lot sooner.
7. Know that Banks will only be getting smarter in trying to go after you (money they still think you owe them). This happens mostly on second lien holders (second loans). But with the ever changing rules, it's hard to tell what loopholes the banks can take advantage of. So be sure you know what you're doing. There are pros and cons.
8. You don't have to miss payments to do a short sale, but in my experience the leverage is greater if you're already in default. Perhaps their way of prioritizing those who are really in hardship.
9. There's more and more inventory of short sales out there. So be sure you still take care of the house, even if you're "letting" it go. Cooperate with buyers and their showings.
10. Lastly, a successful deal won't happen if you do not work as a team with your short sale real estate agent. I've had 3 deals that I worked on for almost a year only to crash towards the end because my sellers already "moved" on.
11. (By Doug Kaller) One of the primary reasons short sales are difficult to close is the inability to locate the actual decision maker. The majority of mortgages are sold after closing. The investor can be an individual, partnership, a small corporation, pension fund, insurance company, or a multitude of other possibilities. The investor is uninformed as to the local market conditions as well as the condition of the home. Many small investors purchased the note with an expected return and are unwilling to cut their losses. If the decision can be made by a single individual, your chances of your offer being accepted are much greater. If the decision is made by committee, one committee member can sabotage you deal.
In summary, I've also gone through a short sale. And so far I haven't regretted the decision. I have a feeling my wife is close to lovingly nagging me soon. I'm just glad I have more options. when that day comes.
Consult with your attorney and accountant to get the best bird eye view picture on your situation.
About the author: Joe likes to think of himself as a short sale expert because of all the heartaches he has gone through with clients not returning calls after working on their short sales for almost one year. But he also has some happy stories like working on 30 successful short sale deals the past 3 years. Joe wants to share lessons learned along the way... Joe is also the author of the #1 Online Guide for Reno Real Estate--Reno Home Blog.
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