Short Sale Facts to Prevent Foreclosure
Short sale has become a popular topic amongst the press, investors, real estate agents, and homeowners that are delinquent on their home loan. The term literally means the lender allows property owners to sell their house short of balance due on their home loan.
Short sale transactions need authorization through the mortgage provider’s loss mitigation department. The process typically takes several months to finish and requires borrowers to undergo financial scrutiny.
The first step of acquiring short sale approval requires property owners to contact their lender to ascertain if their home qualifies. Properties that have already fallen into foreclosure are ineligible for short selling. Therefore, borrowers who are 31 days or more overdue should immediately contact their lender to discuss available options.
When borrowers get behind with mortgage installments they are assigned to a loss mitigator. These people are a key player in negotiating a short sale, but they don’t make final decisions. Instead they mediate between borrowers and banks to reach a mutually-beneficial agreement.
Home mortgage lenders are not required to offer short sales. However, government incentives have become available which persuade lenders to work with struggling borrowers to avoid foreclosure.
Two types of short sale real estate judgments exist. The first is known as ‘Payment in Full without Pursuit of Deficiency Judgment’. When banks enter into this option they agree to accept the sale amount as payment in full and not go after borrowers for home loan deficiencies.
The second is known as a ‘Deficiency Judgment’. This implies the lender requires the homeowner to pay the deficit between the loan balance and short sale amount. Considering many borrowers owe more than the appraised value of their home, deficiency amounts can add up to several thousand dollars.
When borrowers are unable to pay deficiency amounts in full, banks issue a judgment which is reported to major credit reporting agencies. Deficiency judgments stay on credit reports until fully repaid and can prevent borrowers from being eligible for credit for several years.
Most banks require property owners to have a preapproved buyer and signed real estate purchase agreement prior to entering into short sale agreements. Some banks will allow borrowers’ extra time to list their home through a real estate agent.
Many realtors are unwilling to list short sale real estate because they will have to accept a reduced commission or give up commission to close the deal. Short sale transactions involve more work than normal sales and few agents are willing to work harder for less income.
One secret to attracting buyers for short sale real estate is to seek out private real estate investors. Many investors are drawn to short sale homes since they are sold at reduced prices and can deliver a good return on investment.
Several steps are involved with buying and selling short sale houses. The best approach is to learn about the process and available options. Talk with your mortgage provider, short sale specialists, investors and real estate attorneys for guidance and advice.
This entry was posted on Saturday, January 21st, 2012 at 2:23 pm and is filed under Antidote.
