Champion Associates Realty

 

Short Sale

What is a short sale?

A short sale is a sale of real estate where the amount owed on the property’s mortgage is higher than the value of the property. This is commonly referred to as being “upside down” on the property. When a house needs to be sold in this situation; it is generally listed with a Realtor in the traditional manner. However, this sale becomes a three party sale, the buyer, the seller and the seller’s mortgage company. The mortgage company is involved in the sale because they are being asked to take a payoff amount less than the balance owed on the mortgage, a money losing proposition for the mortgage company. All three parties must agree to the terms of the sale.
 
What is the Short Sale Process?
In a short sale, the mortgage company agrees to discount the mortgage balance because of an economic or financial hardship on the part of the borrower. The mortgage company must be contacted to request a “short sale package” to get the process started. Once the short sale package is received it must be completely filled out and sent back to the mortgage company. It is best if the Listing Agreement is attached to the package when it is sent back to the mortgage company as proof that the house is listed to be sold. Once an offer to purchase is received, and agreed to by the buyer and seller, it will be forwarded to the seller’s mortgage company. The mortgage company will look at the price on the offer to purchase and make a decision if it is an acceptable offer to them. If it is acceptable to them the sale and closing will proceed normally. If it is not acceptable to them they will ask for the offer price to be negotiated higher.
 
Short-Sale vs Foreclosure
Cash for Moving: On a Foreclosure you walk away with nothing. With a Short-Sale you may qualify for $3,000 to help you move into another home under the Governments HAFA Program.
Credit Score: A Foreclosure will knock about 200 points off your credit score and remain on your credit history for 7 years. A Short-Sale will only knock off about 50 points from your credit score and will stay on your credit report for only 2-3 years.
Deficiency Judgment: On a Foreclosure the bank may file a deficiency judgment against you to recoup monies owed to them. On a Short-Sale it can be negotiated with the mortgage company that the sales price be accepted as “Paid in Full” with no deficiency judgment.
Buying Another Home. On a Foreclosure it will be 7-10 years before you can buy another home. On a Short-Sale Fannie Mae Guidelines now allow a seller to immediately purchase another home, assuming the sellers mortgage was current at the time of the sale. If not current, a seller can expect to be able to purchase another home in as little as 6 months.
 
Is this the Best Option for me?
Many mortgage companies require the homeowner to be at least 30 days behind on their mortgage payment before they will agree to a short sale, but not always. If you are already behind on your payments this is not a major concern. If you are current on your payments, and you have a good credit score, this is not an easy choice because a short sale will have a negative impact on your credit. In this case you need to ask yourself, can you stay in the home until the value of your home rises, and, is renting the house an option. If the answers to these questions is no, then you may have to cease your mortgage payments for 30 days. A short sale will have less of a negative impact on your credit score than a foreclosure. In almost every case a short sale is your best choice. A Short-Sale will cost you in most cases zero out of pocket expense.
It is of the utmost importance that you select a company that has experience with short sales so no detail will be overlooked that may jeopardize the sale of your house and the chance for you to get a fresh start. If you believe you may be in a short sale situation call us now. The longer you wait the more difficult the sale may be.

   

Gather your financial information—Make sure you have your basic financial and loan information on hand when you call your mortgage company. You’ll need:

 your mortgage statements, including information on a second mortgage (if applicable);

 your other monthly debt payments (e.g., car or student loans, credit card payments); and

 your income details (paystubs and income tax returns).

Hardship Letter—Be ready to outline your current hardship and explain why you are having trouble making your mortgage payment, the reasons why this is a long-term problem and inform your mortgage company that you want to sell your home to avoid foreclosure. Your mortgage company will need to understand the reasons why you are having difficulty in order to find the right solution for you.
 
Call us today to start your short sale process.