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Quite simply, the short sale is a process in which the sale of a property occurs, with the lenders permission, for less than the outstanding loan obligations on the property. This allows the homeowner to avoid foreclosure and the dark stain this can leave on a credit report. The short sale will still be a negative entry on the credit report, but not nearly as bad as a foreclosure.
If you already have your home on the market and are utilizing a real estate agent, you should inform the agent as soon as possible that the property is scheduled for foreclosure. The agent can take steps to guide you through the short sale process, help you work with your lender and possibly accelerate the home selling process. It is important in this situation to not procrastinate. Call your real estate agent and your banker, as both are willing to help you.
- What are the Steps of a Short sale?
- Home Value – How much you Owe = Short Amount
- Put your House on the Market with a real estate agent
- Your agent will Negotiate with the Bank
- Why would a Bank do a Short Sale?
- Why a short sale is better than foreclosure:
- Why Would You Short Sale your Property?
- How to Hire a Short Sale Agent
What are the Steps of a Short sale?
The first thing you will need to do if faced with foreclosure is to determine your property’s market value.This value is based upon what someone will currently pay for it, not what you paid for it or what you need to satisfy the mortgage. A realtor can help you immensely here. A realtor will perform a Comparative Market Analysis (CMA) on the property. This is not the same as an appraisal, which can only be done by a licensed appraiser. A CMA is a comparison of similar properties in the neighborhood which have recently sold, and real estate currently for sale. The average sale price of these properties will give a realtor some idea of what your home will sell for. If you need to sell quickly, you will need to sell your property for less than all of the similar homes currently on the market.
There will be some costs associated with selling your property and these may vary from state to state. These can include title insurance, closing costs and home inspection. A realtor, title company or real estate attorney can help guide you in determining these costs.
Home Value – How much you Owe = Short Amount
Now you need to find out how much is owed on the property via mortgage loans, home equity loans, business loans in which the property is the collateral, and any other liens against the property. You must also figure in the agent’s fee in the cost of the sale if you are utilizing a real estate agent. There is also the matter of real estate taxes. You will probably have to pay a portion of the current year’s taxes. The county assessor will help you here. Now you know how much you need to settle all the financial claims against the property and may proceed with the next step in the short sale.
Total up the outstanding obligations. Now you must subtract this number from the estimated sale price. This will in all likelihood be a negative number. Now you need to call your lender to explain your situation. Most banks have a foreclosure department, and a person with authority to make an arrangement with you is who you need to talk to. Banks are all different in the procedure that they use. Some will be willing to set an amount that they will accept to settle the loan. Some will want to see a purchase offer from a buyer. They will then probably want to approve the sale before it can proceed. Most will want you to fill out some kind of financial disclosure form. If you are dealing with a realtor to sell your home, chances are you will have to send the lender a letter giving the realtor permission to discuss the account with them. The bank will also have other information the realtor will need to do a short sale.
Put your House on the Market with a real estate agent
Once the house is on the market, do what you can to help it sell. Follow the proper procedures in staging the home. You want the home to be as presentable as possible to ensure a quick sale. Again, a realtor can help you with this. If you get an offer, remember that the bank will probably have to approve the sale before you can proceed. Sometimes the bank will require the buyer to make up the difference between the short sale price and what is remaining on the mortgage. You may want to consult a tax accountant when the property sells, because the short sale is regarded as relief of debt. They may regard this money as income and tax you for it.
Your agent will Negotiate with the Bank
- Submit hardship package
- Determine market value
- Submit offers
The short sale can help the homeowner avoid foreclosure and maintain a satisfactory credit rating. This can be achieved as long as they do their research and consult the proper professionals during the entire process. Homeowners must do all that they can to avoid foreclosure, and the short sale may just help them do that.
In life, you may sometimes find yourself in a crisis that is beyond your wildest imagination. Events like a sudden illness, divorce, job loss or some major unanticipated expenditure can put your finances into total disarray. These are traumatic times in themselves, but the financial impact and the inability to meet your commitments make them a lot worse. Bills and mortgages still have to be paid and tough times often call for some tough measures.
If you can’t sell the house and move into a rented home. Selling your home may also become necessary if you are relocating due to a job change. If the property is an investment and prices are crashing, it is better to sell quickly and cut your losses unless you have the holding power to ride the storm and wait for prices to come up again. There are many possible scenarios in which it becomes necessary to sell a home quickly. This is easier said than done, especially in difficult market conditions.
Sometimes the market conditions are so bad that you owe the lender more money than what your home is worth. Many people found themselves in this situation at the height of the recent housing market crisis. In fact, some people owed their lenders almost twice what their home was worth. If you can’t afford to pay your mortgage any longer, foreclosure and short sales are two possible exit options before you. With either option, you lose the home and the money you invested in it, but a short sale is preferable because it causes less damage to your credit rating.
Why would a Bank do a Short Sale?
A short sale is a distress sale with the approval of the lender. The lender allows you to sell the property for less than what you owe on the mortgage. After a successful short sale, the lender will usually waive the shortfall. However, this is not guaranteed unless it is agreed in writing by the lender or the property is located in a state where the law forbids the lender from recovering the deficit. In the US, this law is currently in force in 12 states.
Lenders incur losses in short sales. Hence, they will not approve an application unless they are convinced that there is absolutely no hope of recovering the entire outstanding. Most lenders will not even consider a short sale application unless you are already in default and several months of mortgage payments are overdue. It may also become legally impossible for a lender to approve a short sale if you have filed for bankruptcy.
Call 1-800-805-8354 to connect with a Short Sale Specialist in your area. We have real estate agents who know short sales in your area.
To prove your eligibility, you have to convince your lender that you are in a financial crisis with no possibility of any significant improvement in the near future. You must also show that the market value of your home is less than your mortgage balance. Some lenders may consider a short sale even if you are not in default as long as you convince them that you will soon be in default due to reasons beyond your control.
There is no guarantee that the lender will approve your short sale application. Your chances of getting an approval are much better if you already have a buyer who is ready to buy the property and has the money or a pre-approved loan to pay for it. Without a confirmed offer and a large earnest deposit to back it up, it can become difficult to obtain an approval.
Why a short sale is better than foreclosure:
The main advantage of a short sale over foreclosure is its lower impact on your credit rating. A foreclosure might set your credit score back by about 250 points and it will remain on your credit report for a number of years. In the case of a short sale, the hit on your credit score could be around 100 points and the impact on your credit report is far less damaging. You can expect to qualify for a new loan at reasonable interest rates within two years after a successful short sale. In the case of foreclosure, this can take up to seven years.
(*Please consult with your CPA on actual credit impact as these are “general” estimations)
The other disadvantage of foreclosure is that depending on the jurisdiction, the lender may be able to pursue a deficiency judgment. In the case of short sales, the deficit is usually waived. It is, however, important to get clarity on this aspect in writing from the lender before you go ahead with the transaction.
Most lenders prefer short sales over the long and tedious foreclosure process. Despite this, many short sale attempts fail even after the lender has given the approval. For a successful short sale, speed is critical. Things become easier and your chances of success are much better if you take the help of a real estate agent who is familiar with short sales.
Why Would You Short Sale your Property?
It is not your fault that the Nevada housing market is taking a while to rebound. If you are faced with financial troubles that are causing you hardship which leads you to not be able to pay your mortgage loan as agreed, you need to look at how the market is performing before you take the next step. If the market is on its lowest and there is not projection of an improvement, you don’t want to hold on to your home and pay more than the home’s equity. Short sales are a potential way of freeing you and your family from the financial woes and taking a fresh route to reconstruct your finances.
Allowing your home to be foreclosed can be detrimental in all aspects. First, you suffer the agony of not letting go an unsustainable project. Accepting the reality of the situation and moving on is an excellent way of making up for the same.
A short sale could be the right situation and free you to start a new life free of stress while protecting your record from a Nevada Foreclosure. Foreclosures have devastating implications, including damaging your credit. A foreclosure means you rub shoulders with your lender, meaning you risk being sued by the bank. Facing judicial foreclosure can wear you down, especially because the entire process if lengthy and expensive.
When you allow your home to be foreclosed upon in Nevada, you open up chances of being legally liable for all the losses, since the bank reserves the deficiency rights. This may attract a deadly deficiency judgment lawsuit. On the other hand, a short sale is a friendly way of saying “I can’t afford to pay you.” After you successfully complete a short sale, a bank will issue a 1099-C (cancellation), which is a legal document showing that you have been relieved from the debt. Here, the lender will not come after you to demand any money in the form of fines, or penalties.
How to Hire a Short Sale Agent
Going it alone in a Las Vegas short sale process can be daunting and disastrous. Hiring an experienced real estate agent such as Lori Ballen Realtor® and her team of Las Vegas Short Sale Agents at Keller Williams Realty Las Vegas, who knows the in and out of the Nevada short sale procedures can go a long way in saving you the pain and time. Some banks take advantage of inexperienced realtors with no proven experience with short sales. A good agent will help stage a better bargain and negotiation. Knowing the consequences of a short sale, working with a highly skilled short sale expert is essential in helping you go over the situation as quickly as possible while maintaining your rights and dignity.
Lori also has an extensive network and can match you with a short sale specialist anywhere in the nation. Just ask.