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What is a Short Sale?

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan.[1] It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency. (From Wikipedia)

Short Sale Myths

MYTH: I must stop making my mortgage payments before the bank will approve a short sale.

TRUTH: You do not have to stop making payments on your home in order for the bank to approve a short sale. What the bank needs to see is a solid reason why you are unable to continue making your monthly payments and/or must sell (loss of job, relocation, divorce, etc.). Due to the current market conditions the banks generally understand why the short payoff is being requested – whether you have missed payments or not.

MYTH: If I am doing a short sale I am in foreclosure or pre-foreclosure.

TRUTH: A short sale is simply requesting the bank to accept a total payoff of your loan for an amount less than what you owe. You are only in foreclosure when you receive the foreclosure notice from the bank.

MYTH: I have a second mortgage or home equity line so I can not do a short sale on my home.

TRUTH: The majority of people we work with have both a 1st and 2nd or home equity line. In this situation the 1st mortgage generally approves an amount for the 2nd and we negotiate between the two. The 2nd mortgage company is accustomed to taking a much lower payoff.

MYTH: I will receive some money back at closing.

TRUTH: When you sell your property as a short sale you are not entitled to receive money back at closing because there is no equity in your property.

MYTH: The bank will not pay the commission for my real estate agent and/or the costs of listing the property with a real estate agent will be passed on to me

TRUTH: A real estate agents commission is taken out of the banks proceeds at close of escrow. There should never be an out of pocket expense for a seller who lists their home as a short sale with a real estate agent.

MYTH: Short sale homes are priced lower than other homes in my area.

TRUTH: Short Sales are priced in line with other comparable properties in your area. Your mortgage company will do their own version of an appraisal of the property to make sure they are getting a fair payoff on the property. Length of time on market, condition of the home and how quickly the Seller needs to close are all conditions that affect the price of every listing – short sales included.

MYTH: I have a foreclosure date approaching so there is not enough time to do a short sale.

TRUTH: Because it is generally far more expensive for the bank to foreclosure on your home than to work with us on a short sale we can postpone the sale on your home in most cases while we are marketing and/or negotiating your short sale.

 

 


 

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Short Sale Tips:

If you are currently facing a situation which is causing you to miss payments or sell your home there are several ways that you can be proactive! These tips will help you make it through the process:

  • Don't procrastinate. If you are unable to pay your mortgage – even for only one month, contact your lender and make them aware of your situation. You should also sit down and determine if this is a long term or temporary situation and review all options available to you. If you would like assistance in doing this, please feel free to contact us. We can discuss all of your options for both staying in your home and selling it.

  • Prioritize. After determining how you will proceed, prioritize your debts. If you know you plan on staying in your home it is important to make sure you are not spending money that could be used to pay mortgage payments on other less important debts. Recovering from missed or skipped mortgage payments is far more difficult than recovering from missed or skipped credit card payments.

  • Know your finances. Make sure you know what is coming in and out each month and budget accordingly. Your lender will want to see an itemized list of all of your current income and expenses when they discuss your loan with you.

  • Know your rights and options. If you have questions about the process or your options feel free to use our website as a resource or contact us, along with a trusted tax professional and/or attorney to discuss any questions or issues you may have.

  • Do not lose your cool! You are not alone in this situation and you are certainly not without options. Do not allow yourself to become overwhelmed or ignore the situation. There is help available!

  • Develop a plan. Whether you choose to sell your home or make an arrangement with your bank you should create a plan that extends during this process and well beyond. This will include where you are moving to, how you will spend or save the money you have from missed payments, etc. You will also want to decide how you will deal with your lender.

  • Do your research. Make sure that you know everything you possibly can about your options, the foreclosure process in florida and your lenders requirements.

  • Be prepared. Gather all of your financial information – a summary of income and expenses, bank statements, pay stubs, tax returns, mortgage statements, closing documents from when you purchased your home, a list of your reasons for hardship and any other documents you feel might play a role in working with your banking and have them ready before you contact your lender or someone to assist you with your sale.

Work with trusted professionals. If you need advice or assistance make sure you are working with knowledgeable, experienced and trusted professionals - we would love to give you a referral should you need information outside of our scope of knowledge!

See also: How does a short sale work?

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