I'm glad you visited my website to learn more about the short sale process. My team and I have been making a big push to get homeowners, honest, real advice on their situations before they spend money with companies that promise a lot but don't deliver. I recently had a meeting with a homeowner who was upside down on their home. They owed $425,000 on their home, but it was now worth $150,000. In addition, they also had financial troubles because their ARM had adjusted and increased in payment while, all while their hours had been cut at work. Needless to say, they weren't able to keep up with their mortgage payments. To try and alleviate the pressure, they contacted a loan modification company who asked them to pay $2500 up front to help them - and now they had not heard anything back from them in 5 months! This is an all too familiar story that we here in our offices each day. Many try loan modifications, filling out all the paperwork required by their lender, but they either get turned down or they are approved, but only get temporary relief due to financial difficulties or "temporary" payment modifications. If you are considering a short sale of your home, here is some detailed information that will help you understand fully what the process is and ultimately help you decide if it's the right move for you or someone you know who is in trouble.
What is a Short Sale?
A Short Sale is the sale of a home where the amount of the homeowner's mortgage payoff is higher than current market value (what the home would sell for today). With an approved short sale, the lender agrees to accept a sales price that is lower than what the homeowner owes on the loan. In addition, the lender pays virtually all sales costs, including commissions, escrow and title fees at closing. You can get your home sold, the loan(s) paid off - and you avoid foreclosure.
Why would a mortgage company agree to accept a Short Sale?
There are many reasons why mortgage companies are now allowing homeowners to Short Sale their homes. First, foreclosure costs are extremely high for lenders. They have to pay asset management companies and realtors to handle the foreclosure process. This cost and what it takes to keep properties maintained, keep utilities on, and make repairs when damage occurs, can drag down the lender's bottom line significantly. Secondly, typically when a homeowner works to short sale their home, they continue to live there and take care of the property. This is a great benefit to lenders as they work to clean up delinquent and non-performing loans.
How do I know a Short Sale is right for me?
If you are facing a financial or personal hardship, mortgage lenders are increasingly willing to work with you. Many borrowers have tried to modify their loans in these situations, but they either don't get quick response before their credit is ruined, or they jump through all the lender's hoops only to find that they've been denied and must quickly become current on their payments or face foreclosure. This is an incredibly stressful time for those in trouble. Some will try to liquidate their investments to take care of delinquent mortgage payments, or they'll borrow from a loved one to make things right with the lender. The only problem is, when it's all said and done, if you're experiencing a financial hardship, like loss of wages or divorce, you will most likely end up behind again. Then the process starts all over again. If you want to get out of this cycle or you're sick of waiting on your bank OR you simply want to walk away and start over, a short sale is a great option for you. We can help you process your paperwork with the bank, list your home for sale at market price and negotiate the contract and closing with your bank... all while continuing to live in your home. Also, if you're worried about where you will move from there, we can even help you find your new rental home or consult you on buying a new home. That's right, it is possible to buy again and we can show you how.
If I do a Short Sale, how much will I have to pay to sell my home?
Nothing - That's right... you can walk away from your mortgage paying literally no sales costs if your lender approves the Short Sale. Commissions, title and escrow fees are all paid by the lender as part of the Short Sale approval. The fact is, lenders will accept the resulting losses of a Short Sale to avoid bigger costs associated with foreclosure.
What if the home I need to sell is an investment property and it's in need of repairs?
You CAN Short Sale an investment property. Also, if the home needs repairs, even if someone is still living there, we can price the home to attract cash buyers and/or buyers willing to take on any project. We have sold numerous investment homes through the Short Sale process.
How do I know my hardship(s) is one that my lender will consider?
A big part of getting your lender's Loss Mitigation Department to approve a Short Sale is to submit a very strong hardship letter. The hardship letter sets the tone for your whole Short Sale file. The hardship letter should be truly personal and written in a way that you or the person applying for the short sale would talk. Even if there is broken language involved or misspelled words, it should be the borrowers story. Here are some common "hardships" frequently approved by mortgage lenders.
How will a Short Sale affect my credit and/or security clearance?
The biggest concern is to avoid foreclosure. Foreclosure does the most damage, by far, to your credit status. It's even worse than bankruptcy. Now, you may very well miss your mortgage payments while trying to get your short sale approved and your credit will take a hit. But, if you can avoid foreclosure, your buying power will return faster. Industry standards show the following is typical:
What is the difference between short selling and foreclosure?
| Issue | Foreclosure | Short Sale |
| Credit Score | Score lowered anywhere from 250 to 300 points. Typically will affect score for over 3 years. | Late mortgage payments will show, but after sale loan will be reported as paid or negotiated. Can lower score as little as 50 points if all other payments are being made. Typically will affect score for 12 to 18 months. |
| Credit History | Foreclosure remains as public record on a person's credit history for 10 years or more. | Short Sale is not reported on a credit history. The loan itself is typically reported as "paid in full, settled". |
| Security Clearance | Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in the CIA, Security, or any other position that requires a security clearance, in almost all cases clearance will be revoked and position terminated. | A Short Sale on its own does not challenge most security clearances. |
Will my lender approve my short sale if I'm not behind on my mortgage?
Lenders have been known to approve a short sale when the borrower was current on their mortgage. Typically, lenders do not want to consider a short sale if they're still getting paid on time, but there is no reason not to try to push a short sale though. In this case, call me and we can talk about your options.
I have two loans - can I do a Short Sale and do both lenders have to approve?
Yes. The key is to get both lenders to cooperate. Many times the same lender holds both the 1st and the 2nd trusts, which works in the borrowers favor. But if there are two lenders involved, you can still Short Sale your home. You simply want to stop foreclosure.
Are all Short Sales approved by lenders?
No. It takes a strong Short Sale package to get any lender to approve to selling your home at a loss. You'll want to be very detailed with your paperwork and write a strong, compelling hardship letter. On our end, we will list your home at a fair market price and then get a contract ratified on it ASAP so we can present the contract to the lender. To see our company timeline for the Short Sale Process, email me at jennifer@jyhteam.com. I'll email you right back with details of how we manage to close an average of 4 Short Sale transactions per month.
How do I apply to Short Sale my home?
There is a lot to consider when deciding if a Short Sale is the right option for you. First, not everyone is eligible. Find out now if you are by applying online. We do not share your information and there is no obligation. I am here to help you decide on your best option, not push you to sell. To apply, click here or call me to talk about your situation. Call me on my cell phone anytime at 703-400-6757. I look forward to talking with you!
