NO LATE Payments Short Sale! Can it be done? YES!
For one of our seller's - it was a wish come true. They had done their homework and believed they could complete a short sale on their home without missing a single payment. They had gone online and wanted an agent who would understand their view and help them successfully work a NO-Late Short Sale. They found this Realtor online and knew we specialized in short sales.
In this transaction, the sellers had already attempted to work through a modification scenario and were declined. It was helpful that they had their HAMP denial letter as that allowed us to immediately list the property and move into a HAFA short sale process. You might ask why someone would bother since a short sale is already damaging to your credit. Yes, that is true. And, in the month that the Short Sale closes it is almost as damaging to a credit score as foreclosure. But, here is the kicker; the true credit damage of a short sale, is short sale PLUS multiple late payments. If you have six months of late payments and then the short sale completes - the sum is quite extensive and delays the credit recovery time.
Understandably, not all sellers can make their payments. For those they want, there are situations that will allow the loan to be current and still successfully close on a short sale. A knowledgeable Short Sale Agent in your area will understand the nuance of a No-late Short Sale. In a No-Late short sale, the credit recovery time will be quicker. Additionally some seller's are much more satisfied to end ownership of their home on a positive note. Making payments on time still matter to many seller's.
It is my opinion that prior to HAMP, the investors/lenders made this request as the most direct way to prove hardship. In the process the lenders allowed additional wholesale decimation of homeowners credit all in the name of "helping" the owners through a short sale. Yeah... right! If seller's have been using IRA's, savings and credit cards to stay current, that should be sufficient to be considered a hardship.
Do not listen any further to the ongoing chant of "must be late to qualify". This may apply to some situations but not all. In the last year we had noticed a change in lenders allowing short sale approvals even though the sellers were not late on payments. Short Sales are changing all the time and what you have heard over the seven years may no longer be true. For this particular seller, the escrow closed in under three months. They received their $3,000.00 HAFA incentive, and have no future deficiency issues. All in all, a very good ending to a difficult situation.