What Is A Short Sale?

March 19, 2011

Short Sale Guides

What Is A Short Sale

In the current housing market you have surely heard the term ‘short sale’ mentioned many times. A short sale is when you reach an agreement with your mortgage company to sell the home for less than the current amount you owe. Why would your mortgage company or bank do this? With a large amount of foreclosures on the current market it could be a great deal for your bank. Some banks im sure are inundated with foreclosed homes and would like to clear out some inventory or not accept another. Getting something in the short term for a property is more attractive than sitting on the property hoping to sell.

If you are facing foreclosure you should look into a short sale. You can avoid the foreclosure process and in most cases the lender will forgive a portion of your current loan. This all sounds like a great idea and an easy out but of course there is a catch. It has a very high probability of damaging your credit and the lender may not agree to a short sale. Most lenders will only entertain the idea of a short sale if you are several payments behind or if you have gotten a default notice. They will also consider the short sale option if you have suffered a life changing experience.

Hardship Letter

If you proceed with a short sale you would need to provide your lender with a short sale hardship letter. This letter will explain to your lender why you should be granted a short sale. The worse you can make it sound the better because these letters all get read by an actual person. They are not just a formality but can make or break the decision made by your lender.  Some things you would want to point out in your hardship letter:

  • Divorce
  • Job Loss
  • Employment Relocation
  • Health Concerns
  • Death of Your Spouse

Those are just some of the items that will normally work in your favor but any other serious life changing events can be discussed.

Buying A Short Sale

If you are a thinking about buying a short sale you need to be aware that you will have extra paperwork to complete. The process may take longer than usual and you may have more fixing up to do around the house. You can potentially get an amazing deal through a short sale so it is something to consider as an option when looking for a new home.

A real estate professional can answer any questions you may have in detail about the short sale process.

HAFA Short Sale Program

What is the HAFA short sale program?

HAFA stands for-  Home Affordable Foreclosure Alternative

This program was created by the federal government in the wake of the housing crisis to help home owners get out of their home loans without defaulting or simply walking away.

The Benefits of a HAFA Short Sale:

  • No Deficiency Judgments
  • No Cash Required at Closing
  • No Promissory Notes
  • $3,000 to Seller for Relocation Assistance
  • Additional Incentives for 2nd Mortgages, up to $6,000 more at closing

Do you qualify for a HAFA Short Sale?

Eligibility Requirements For HAFA

  • Must be your primary residence
  • First lien mortgage –cannot be a government loan
  • Originated prior to 1/1/09
  • Is delinquent or default is foreseeable
  • Current unpaid principle balance is under $729,750
  • Total monthly mortgage payment exceeds 31% of Monthly Gross Income

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