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Short Sale Homes

August 12, 2011

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In this article we will touch on a couple things regarding short sale homes. Some may be looking for information about buying a short sale while others may be looking for information about the condition of short sale homes. First we will talk about buying a short sale; this will be short because we recently wrote an article dedicated to the subject of buying a short sale.

If you are interested in information regarding buying a short sale then follow this link. Buying A Short Sale

Now if you’re wondering more about the general condition of a short sale then you should not be too concerned. These homes are mostly treated the same as any other on the real estate market. One small difference is that in a normal non short sale home transaction any repairs needed would be completed before closing on the property. In a short sale this may not always be the case. It’s typical for the buyer to be issued a credit to complete the repairs themselves instead of the seller finishing the repairs. It’s also not unusual for no credit to be issued and you the buyer will be asked to take on the financial burden of completing any repairs.

Most short sale contracts will include an ‘as-is’ clause shielding themselves from liability if major issues show up in the future. When writing up the contract you should allow yourself to withdraw from the deal if major problems show up. The banks are generally unwilling to lower their asking price even if problems arise.

While it’s very possible to get yourself a nice home below market value you must be careful when purchasing short sale homes. Purchasing a short sale is a lot like buying a used car; you don’t always know what you are going to get once you get it home. Always work with a short sale expert who can guide you the entire way and steer you clear of any pitfalls.

If you are looking for short sale homes listings then we may not be much help to you in your search. I would recommend you take a look at this site which may be able to get you going in the right direction.

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Buying A Short Sale

August 8, 2011

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If you are interested in buying a short sale then be prepared for a potentially very long wait with lots of little issues to contend with. The term short sale is a bit of a misnomer because in reality nothing is short about a short sale. So what are some things to keep in mind when deciding to buy a short sale?

    • The asking price of the home is normally set by the seller/agent. This can create a problem for you later on down the road because the LENDER always has the final say in the asking price of the home. The agent/seller may set the price low to attract interest but then once it’s sent on to the lender for final approval they may balk and increase the price.

 

    • If you submit an offer on a short sale that the lender feels is too low they may not respond or respond very slowly. Since the lender is not always aware of how much the seller is asking they may feel your offer is simply too low. This can create problems for you, the buyer, if the seller is not operating in good faith.

 

    • Don’t set your heart on getting the property. As we mentioned nothing is short about a short sale so its best to remember that you may change your mind on this property once you are 3 months into the process and it feels like its not moving fast enough. Stay optimistic but continue looking at other properties.

 

    • If you decide to pursue a short sale ask how many loans the seller has taken out on the property. It’s obviously easier to work with one lender instead of multiple lenders. Remember the LENDER always has final say when approving a short sale. The fewer lenders the better.

 

    • If you see a short sale listed as anapproved short sale this means the seller has been given the green light by their lender and will have an approved selling price. This can speed things up significantly.

 

    • When purchasing a short sale its important to understand that the home may be lacking in repair. The responsibility is placed upon the buyer to handle all repairs and a credit may or may not be issued to cover the repairs. This is just simply the cost of purchasing a home below its market value.

 

  • If the lender gives approval on the short sale you MUST close on time, there is no leniency. Normally in a more traditional home sale some leniency is provided for last minute adjustments/issues. This is not the case when it comes to short sales. This is why it’s so important to be working with a reputable short sale real estate expert so that no last minute hang ups ruin your transaction. Lenders have little patience when it comes to short sales so be extra prepared.

While buying a short sale can be great it is also more difficult. If you prepare yourself for a long ordeal and hire the right broker to help you along you should be fine. Just be prepared to walk away if you feel its taking too long.

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Writing A Short Sale Hardship Letter

July 24, 2011

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When approaching your lender about listing your home in a short sale you will always be required to submit a hardship letter. Suffering a hardship is one of the qualifiers lenders use to determine if they will allow you to sell via a short sale. So what qualifies as a hardship? They are typically life changing events that don’t happen often although they don’t always have to be that is up to your lender. I will list some examples of hardships below:

  • Divorce or separation.
  • The death of a family member or your significant other which were contributors to the loan payment. This typically only applies to family members who were actively involved with paying the loan.
  • If you are in the military and are called to duty. This is not always a guarantee but most will consider this reason.
  • Job relocation. This must be due to your employer moving your job somewhere else and there will also be a range requirement. You must move a certain distance away from your current location.
  • A sudden increase in debts. This could be caused by an illness of you or your spouse.
  • A significant reduction in your income. Again, this could be caused by an illness, loss of job, or a decrease in available hours at your employer.
  • A sudden increase in your expenses caused by anything previously mentioned in the other points.

As you can see it’s not that simple to just say you’re going to sell your home in a short sale to get from underneath the negative equity. I’d imagine some lenders are being a bit more lenient when it comes to hardships these days. With the housing market performing subpar they may ease up just a bit.

When writing the letter you must do the following:

  • State the legitimate, special circumstances which have caused you to fall behind on your house payments.
  • Explain your current situation and what you are doing to try and get back on your feet.
  • Don’t make your situation worse, by complaining to them.
  • Be honest and represent the facts clearly.

All of the above is what your letter should contain but just knowing what you need isn’t going to be enough. You need to know how to write the letter to get the best possible response from your lender. There is a great tutorial I recommend which will show you exactly how to structure your letter to get approval. If you are interested in the tutorial you can CLICK HERE to see if it’s something you would be interested in.

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Short Sale Vs Foreclosure

April 13, 2011

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If you find yourself in the position of having to decide between letting your lender foreclose on your home or attempting to sell in a short sale, below are some pros and cons for each option. A short sale is a great idea in the current real estate market.

Foreclosure

This is a legal process used by your lender to reclaim your property and sell it to pay off your loan. Some are opting to simply let the banks foreclose on their properties and walk away from the loan. If you have the means to continue paying your loan you should continue to pay. A foreclosure will reflect more negatively on your credit report compared to a short sale.

The foreclosure route is the shortest path to ridding yourself of your problem but also the most damaging.

Short Sale

You can request permission to conduct a short sale from your lender at any time. You do not need to be in default to receive permission however you will most likely need to meet several other criteria before you are granted permission. The obvious benefit to this is that you can get out of your current loan early if you are ok with taking a loss.

A short sale also will not hurt your credit score as bad as a foreclosure. If your credit is in ok condition you could possibly purchase another home immediately after your short sale.

At the moment the government is not taxing any debt forgive by your lender during a short sale. All the more reason to seriously consider going the short sale route.
A foreclosure is just all around a bad thing to have on your credit report and will hinder future home purchases for years to come. A short sale can be lengthy and bothersome but it will save your credit and allow you to purchase another home when you feel you are capable of fulfilling your payments.

 

short sale vs foreclosure table data

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The Short Sale Process

March 23, 2011

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The short sale process can be cumbersome. There is nothing ‘short’ about a short sale so below I will list some things to help you prepare for the long short sale process.

If you are the seller there first thing you will want to find out is if you’re eligible.

  • Have you suffered a hardship?  This can mean divorce, unemployment, death, etc..
  • Do you owe more than the house is worth?
  • Impossible for you to modify your current loan
  • You cannot afford to pay your mortgage.

If you qualify you may be required to submit some or all of the following documents.

  • A letter of authorization allowing your lender to communicate with the bank.
  • HUD-1 or preliminary net sheet
  • Completed financial statement
  • Seller’s hardship letter
  • 2 years of tax returns
  • 2 years of W-2s
  • Current check stubs
  • Previous 2 months of bank statements
  • Comparative market analysis or list of recent comparable sales

If you’re lender finds that you are eligible and you move ahead with the process you would want to find a realtor who specializes in short sales. They will help you find the current market value of your home and expedite the entire process. They can save you a lot of time and wasted energy.

If you are the buyer:

  • Learn to be patient!
  • Hire a realtor that specializes in short sales.
  • Keep searching for other houses because short sales can be unpredictable.
  • Remember that you are essentially buying the property from a bank. They can be unpredictable.

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Do I Qualify For A Short Sale?

March 19, 2011

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Occasionally, your lender may allow you to enter a short sale while your home is in pre foreclosure status. Your lender does not have to allow you to enter a short sale under any circumstances. Here are a few things to check to see if you may qualify.

  • Has the market value of your home dropped? You will need to be able to show that your property is worth less than the unpaid balance on your loan. You may need to find other home sales in your area to compare and substantiate the drop in market value.
  • You are in the pre foreclosure stage. This means your loan is in default or near default. Now, this may not always be necessary if you qualify on many other items.
  • Seller has experienced a life changing hardship. This may include divorce, bankruptcy, unemployment, death, etc..
  • Seller has NO money. The seller will need to show the lender proof of all available assets and they will determine if the seller has the ability to pay or grant the short sale.

Remember that your lender may work with you on a short sale regardless of your circumstances so its best to inquire. A realtor will be able to answer any questions about a short sale that you may have.

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Should I Buy A Short Sale?

March 19, 2011

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That is a good question to ask yourself when you are searching for a new home. You must consider all of your options in order to find the absolute best deal possible. If you come across a home that has a really low price there is a good chance it is a short sale.

Here are some tips to help you during the whole process.

  • Find an agent that deals in short sales. An experienced agent can help simplify the entire process and look out for your best interests. Keep in mind that these types of sales can take a long time to close and the right agent can get you there faster.
  • Don’t get overly excited about any short sale property. The process can take several months to complete sometimes and even then you may run into problems that may force you to dump the property and move on.
  • Buy title insurance. After you purchase title insurance the insurance company will do a comprehensive background check on the property. This is important because it will discover anything that may need to be brought to your attention. Back taxes, liens, and debts will all be discovered.
  • Not every short sale will be a bargain. Just because a property may be a short sale does not mean it will come with a great price. It’s possible the owner may have paid an inflated price originally and the current price may still be above current market value.

As you can see buying a short sale is a more difficult path to home ownership but if you find a great deal you should let your realtor know you are interested. Just remember that there is nothing ‘short’ about a short sale. Good luck in your home hunting!

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What Is A Short Sale?

March 19, 2011

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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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