What is a Short Sale?
A Short Sale is the sale of a home for a price that is below what is owed on the property and the lender(s) accept and approve the sale of the home at a price less than the loan balance and still satisfy the loan.
The good news for you, the existing lender pays commissions, escrow and title fees. Your home gets sold, the loan(s) paid off, you avoid being foreclosed on, and your credit is safe.
Is a Short Sale for me?
With current market conditions lenders are becoming more open and willing to work with borrowers that face financial hardship and accept a discounted payoff on a mortgage.
If you are facing a hardship that makes it likely you may not meet your obligation of paying your mortgage, the lender may prefer to settle the matter with you instead of taking the property through foreclosure.
When considering the option of a Short Sale, remember that your lender is looking to limit any potential loss on your loan. With a Short Sale the lender may prefer this to foreclosure.
In short, your lender wants to work with you.
If I do a Short Sale, how much will I have to pay to sell my home?
Nothing. There are no out-of-pocket costs since the mortgage holder pays all sales costs.
Nothing. It’s true, in most cases you will pay literally no sales costs if your lender approves the Short Sale. All commissions, title and escrow fees, and even most repair expenses are paid by the lender as part of the Short Sale approval. We will include the following clause in the contract.
“Seller’s agreement to sell is subject to approval by existing lender of a Short Sale at no cost to Seller. Seller shall not be required to deposit funds to close escrow.”
Remember, lenders approve Short Sales and accept the resulting loss in an effort to avoid bigger losses through foreclosure.
How do I get started on a Short Sale?
If you are interested in getting pre-qualified for a Short Sale, we can do it online.
Prefer the phone or make an appointment? Call 949-395-4223
Can I simply deed my property to someone else and avoid the hassle?
It is usually a bad idea to deed your property without paying off the loan. First off, you will still be considered primarily responsible for payment of the loan. Should the loan payments do not get paid, or the home forecloses, it will show up on your credit!
The other thing is that when you deed your property to someone else, you no longer have control of the property. No deed, no control of the property.
Unless you have consulted with an lawyer, do not deed your property to someone without paying off the loan.
What sort of hardship would my lender consider legitimate?
Sometimes it may depend on the mortgage company. In general, as long as there is a real hardship and the mortgage company believes the loan is very likely to become delinquent, the Short Sale request will be processed by the Loss Mitigation Department.
To get the Loss Mitigation to accept a hardship is to write a very strong hardship letter. It is this letter that will set the stage for the whole file.
The following are “hardships” that are accepted by mortgage lenders.
- Family illness or injury
- Divorce or split of domestic partners
- Job loss or significant income loss
- Illness or injury in the extended family – particularly if it forces relocation
- Adjustment in mortgage payment or unforeseen increase in living expenses
- Job relocation when the property is equity deficient
I am current on my mortgage, will my lender consider a Short Sale
Depends. Some lenders will not accept the file until the loan is delinquent. Still others may accept a Short Sale file for approval on loans that are not delinquent.
The best way to determine whether or not a lender will accept a file for approval on a loan that is current is to submit one for approval. This, at no cost to you, is the best way to know.
Why would a mortgage company agree to accept a Short Sale?
For several reasons which include;
- Reserve Requirement- Delinquent and non-performing loans place a burden on mortgage lenders. Lenders must set aside funds in reserve to deal with potential losses from all delinquent and non-performing loans. These funds cannot be put to work generating new loan fees until the bad loans are resolved. A successful Short Sale lets the lender put more money to work.
- Legal Concerns – Pressure has been put on mortgage lenders to work with borrowers to equitably resolve situations where borrowers are unable to meet their mortgage obligation, particularly when the borrower makes an effort to arrive at a compromise solution.
- Wall Street is Watching – Mortgage lenders rely heavily on their ability to package and sell bundles of loans on the secondary mortgage market. They need to sell these bundles of loans in order to put the funds back to work by loaning the money again and collect loan fees along the way. If mortgages perform poorly after they are sold it could impact the lender’s ability to sell their loans on the secondary market. A successful Short Sale gets the loan payoff resolved quickly.
- Asset Management Expenses- If a lender acquires a property through foreclosure, the property will be managed until it is repaired and resold. It is expensive to manage real property assets – homes – spread throughout the region, the state and possibly even the nation. Keeping properties maintained, keeping utilities on, making repairs and the administrative costs attached to these activities are all costs the lender would prefer to avoid. A successful Short Sale eliminates most of these costs
Do lenders approve all Short Sales?
No. For this reason you should work with someone who has experience at getting Short Sales approved.
From Short Sale package to the lender and up to working with the lenders Loss Mitigation Department, we know how to keep the file moving towards approval.
Your first step is to get pre-qualified for a Short Sale. There is no charge and it’s simple.
I have two loans, can I still do a Short Sale?
Yes. Working with both lenders is not a problem. Even if what your home is worth is below the balance of the 1st mortgage, normally, we can get the two lenders to cooperate.
After all, neither lender wants to own another home through foreclosure.
My property is in rough shape and needs work, can I still do a Short Sale?
Of course. Lenders are more apt to do a Short Sale on a property that needs work than on a property that doesn’t. Why? Lenders understand the risk of loss goes up when they foreclose on a property that needs work.
They’re in the business of making loans not fixing homes.
I am concerned about my credit, how will a Short Sale affect my credit?
The main thing is to avoid foreclosure. Even worse than bankruptcy, a foreclosure is the most damaging event your credit can take. It may happen that during the time that your short sale is being approved you may miss your mortgage payments, and this will show up on your on your credit.
You will likely be able to resume normal borrowing relatively quickly by avoiding foreclosure.
My income problem was temporary. Do I need to sell my home?
You have a chance of keeping your home but first you must convince your mortgage company of two things:
- The problem that caused the mortgage payment disruption was beyond your control, such as illness, injury, temporary disability or forced job etc.
- You are now solidly in a position to stay current on your mortgage payments and show that you can make some progress towards making up the delinquent amount.
What is a Forbearance Agreement?
A Forbearance Agreement is a written agreement with your mortgage company in which you arrange to keep your home and will normally include two primary elements:
- A promise by the borrower to remain current on the mortgage going forward
- Some plan for making up the delinquent interest and other charges. This may include making additional payments to the mortgage company or the delinquent amount could be added to the loan to be paid later.
How quick can a foreclosure occur?
In California a foreclosure can be completed in 6 months or less from the date the loan becomes delinquent. We are seeing many different banks and servicers with different time schedules for this. Feel free to contact us at (949) 395-4223 to find out about your lender history.
What is the timeframe?
Once a Notice of Default has been recorded, the foreclosure can be completed in 4 months or less. We are seeing many different banks and servicers with different time schedules for this. Feel free to contact us at (949) 395-4223 to find out about your lender history.
What can I do to stop a foreclosure on my home?
The best way to stop foreclosure is to bring the loan current. If you are unable to bring the loan current then you may want to speak with your lender to see if they will grant you extra time so you can find a solution to the problem. You may want to ask them about a Short Sale solution. If you are considering a short sale please contact us right away at (949) 395-4223. Many of the lenders are offering relocation assistance for the borrower to do a short sale. One major lender is offering up to $35,000 and another is offering up to $30,000. Call us to find out if your lender is offering assistance.
What are my best options to avoid foreclosure?
First of all, let your lender know that you’re working to solve the problem. You may also want to consider: Selling your property – Refinancing – Negotiating a Forbearance Agreement or a Short Sale. Call us to discuss how each of these may apply to you and your property.