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Get all of your short sale answers here!

22 Apr

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As a home owner, you might be faced with this question, what is the “right” thing to do if I am missing mortgage payments? In order to answer that, you need to educate yourself on exactly what is a short sale? What can I do to fix my situation? Do I walk away and let my house foreclose or do I ask for help? What happens to my credit if I do a short sale? Continue reading and find the answers to all of your questions as more. Just know, you are not alone.

What is a Short Sale?

A short sale is when you, as a homeowner, makes an agreement with your mortgage lender of your property, for an amount that is less than what you owe.  They will agree to terms equal to market value. It is a shortage to what is owed.

 Why would a mortgage company agree to accept a Short Sale?

Number one reason being they can net more through a short sale than they can a foreclosure, simply due to the costs that are incurred during the foreclosure process and the maintenance of the property needed after they own the property. Second, there are legal concerns. Mortgage lenders have come over a lot of legal pressure to work with homeowners to come to an agreement or resolve if they are unable to meet their mortgage obligation. A short sale is a way to show they are working with the homeowners. Wall Street is also watching them as mortgage lenders rely heavily on their abilities to package and sell loans on the secondary market. If those don’t perform well, they are not able to sell those and bring in additional income.  They also have a reserve requirement in the amount of money they can loan out. If that money is tied up by loans that are not making them any profit, money, they are limited on being able to loan more money, thus, they would want to short sale those off and move it to the pool where they would be able to loan off more money.

Can I simply deed my property to someone else to avoid the hassle?

Deeding your property to another person will NOT release you from the mortgage debt. Your name being off of title will only release your name from the title liabilities and not the debt liabilities. It will NOT avoid foreclosure for you.

What sort of hardship would my lender consider legitimate?

As long as it is real and the lender feels that there is probability of delinquency on the mortgage then they will consider it a legitimate hardship, including but not limited to, death, illness, divorce, loss of job, loss of income, unemployment and damage to your property.

How will a short sale affect my credit?

It really does vary and is a case by case basis. The short sale isn’t what really negatively affects your credit, it is continually being late on your mortgage payment that does the most damage. Being late time and time again is what affects your credit every month. A foreclosure could completely collapse and deteriorate your credit entirely.

Can I consider a Short Sale if my loan payments are current?

Yes, you absolutely can. You don’t have to be late on your mortgage to consider and complete a Short Sale. However, there are underlying investors that own your mortgage note that have guidelines that supersede that. You will need to check with your specific investor before considering the Short Sale for your mortgage.

Why would I work with a Realtor during my Short Sale?

A licensed professional is FREE! There is NO COST to you so why wouldn’t you? You will have questions throughout the whole process so you will need to have someone who is licensed and a professional in the Real Estate industry help you through. A short sale is a TEDIOUS and step by step process which includes many follow-ups that needs to be completed.

Will the lender pursue a deficiency judgment against me?

A deficiency is a shortage between what is owed and what you sell it for. If you owe $200,000 on your property and you sell it for $100,000, the deficiency will be the $100,000 shortage between which is owed and what you sold it for. When you negotiate your short sale, the bank will stipulate on their approval letter whether they will or will not pursue that deficiency. They will either reserve the right or give you what is called a full satisfaction and release of the debt.  We try to negotiate a full satisfaction and release on all of our short sales so you won’t have to worry about that deficiency judgment.

Weigh your options. Know there are other options out there other than foreclosing on your house and losing everything. You can short sale and walk away and buy a house again. There’s no black mark against you, nothing negative to say! Do what’s best for you and your family but know your options before making a decision!

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