A short sale is a very good solution for a distressed homeowner who needs to sell, and who owes more on their homes than they are worth. Lenders would rather have a home sold in a short sale situation than get it back in foreclosure so they have increased staffing and streamlined the process to get short sales done more expediently. There have been recent changes in corporate policy and government programs to improve the likelihood of a short sale being approved. Some programs, such as HAFA, will actually give the homeowner cash at closing to help them move and get on with their lives. The Making Home Affordable government program was implemented to produce and monitor some of these programs.
What is a short sale?
- A homeowner is ‘short’ when the amount owed on his/her property is greater than it’s current market value.
- A short sale occurs when a negotiation is entered into with the homeowner’s mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then ‘sold short’ of the total value of the mortgage. The lender takes a short payoff.
For homeowners to qualify for a short sale, there are 3 criteria:
- Hardship – Could be caused by lost job or reduced employment, medical bills, death in the family, relocation, etc.
- Monthly Shortfall – You have more bills than income and cannot stay afloat. A lender will need to see that you either can’t affort the mortgage or it is imminent that you will not be able to (you’ve used all your savings, run up your credit cards trying to stay afloat).
- Insolvency – The lender will need to see that you don’t have assets available that you could tap to make your payments. The lender is not supposed to tap your retirement funds however.
The process can be complicated and time-consuming and it takes the expertise of experienced professionals. We hold the CDPE® Designation and we are ready to identify all possible options and, when possible, assist in the quick execution of a short sale transaction.
Not every agent is experienced or educated in handling short sales and it’s important to use professionals who are in order to be successful and not lose your home to foreclosure. Please feel free to contact us for a free consultation. Also, please request a copy of the handout “Short Sale vs Foreclosure.” We can email or snail mail it to you and it contains important information you should know about the consequences of a foreclosure.
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Ocean Breeze Real Estate assumes no responsibility nor guarantees the accuracy of this information and is not engaged in the practice of law nor gives legal advice. It is strongly recommended that you seek appropriate professional counsel regarding your rights as a homeowner. DRE# 01388410 & 01415177