SHORT SALES - FREQUENTLY ASKED QUESTIONS
What Is A Short Sale?
A short sale is when the mortgaged property is sold for less than the outstanding balance of the loan, due to an economic hardship on the part of the borrower, and is an alternative to bankruptcy or foreclosure. The mortgage lender accepts the proceeds of such sale as full satisfaction of the debt. In essence, a short sale is simply negotiating with the lender to accept less than what is owed on the debt. The lender reserves the right to approve or disapprove of such a sale.
When Is A Short Sale Executed?
A short sale is executed when the lender believes the result would be a smaller financial loss than foreclosing. A short sale is typically faster and less expensive than foreclosure and must be executed while the home is in pre-foreclosure stage.
What Are The Advantages Of A Short Sale For The Homeowner?
The advantages of a short sale for the homeowner include not having a foreclosure or bankruptcy on their credit history which would otherwise adversely affect their credit report. A foreclosure is the most damaging to credit status. While a short sale is documented on the homeowner’s credit report and remains on the credit report for 7 years, the same amount of time as a foreclosure, and could prevent issuance of a mortgage during that period of time, the homeowner is likely to resume normal borrowing for car loans, credit cards and such relatively quickly.
Does a Short Sale Stop A Foreclosure?
While the short sale itself does not stop the foreclosure, lenders normally work with a homeowner and delay the foreclosure if necessary, if they receive a legitimate short sale proposal. The lender does not want the property, and would rather resolve the situation before the foreclosure is complete.
Will A Lender Consider A Short Sale On A Mortgage That Is Current?
Some lenders will accept a short sale proposal for approval on loans that are not delinquent. Other lenders will not accept the proposal until the loan is delinquent. The only way to know is to submit a short sale proposal to the lender for approval.
Who Pays The Fees Associated With A Short Sale?
In a Short Sale, the lender in nearly all cases pays all the closing costs – including title fees, escrow fees and the real estate commission on behalf of the homeowner.
What Are The Qualifications For A Short Sale?
Some of the requirements to qualify for a short sale include: (1) a substantial decline in market value of the mortgaged property in which the property is worth less than the balance due to the lender; (2) the mortgage must be either in or near default; (3) the borrower has fallen on hard times and must submit a “hardship letter” explaining why they are unable to pay the difference due upon sale; (4) the borrower must submit tax records or financial statements proving they have no assets; and (5) the homeowner must receive an offer on the home that is acceptable to the lender.
Why Does It Take So Long To Close A Short Sale?
The amount of time it will take to close a short sale varies. Since the borrower is asking for a discount on the amount owed, the lender must complete an evaluation of the property and determine if the loss is justifiable. In addition, several parties to a short sale have a big impact on the amount of time it may take; the seller, the lender, the negotiator, and the buyer.
FOR ADDITIONAL INFORMATION OR QUESTIONS REGARDING SHORT SALES,
PLEASE CALL ME AT (727) 458-6724.
