Short Sale Information
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What is a short sale?
A homeowner is ’short’ when a borrower owns an amount on his property that when combined with closing costs and commission is higher than current market value.
In order to have a short sale approved, the seller has to either be in or be headed for foreclosure. This means that the seller has to have a valid financial hardship for why they can’t pay their mortgage.
A short sale occurs when a negotiation is entered into with the homeowner’s mortgage company or companies to accept less than the full balance of the loan at closing. A buyer close on the property and the property is ’sold short’. In a short sale, the homeowner’s mortgage company pays the agent’s commission and closing costs and not the homeowner.
Why would a lender accept a short sale?
One of the most common misconceptions that a very high percentage of homeowners have is that their lender is lying in wait ready to jump out and take their house. Nothing could be farther from the truth because foreclosure is very costly to the lender compare to other alternatives.
Reality is lenders are in the finance business not in the real estate business and they do not want the homeowner’s property. Whether the lender chooses to go through with a foreclosure or agree to a short sale, they are taking a loss either way, but in many cases they would take less of a loss with a short sale and resolve the matter in a comparatively shorter time frame. In nearly every case, a short sale offers a better return on the lender’s investment than a foreclosure does.
What is a legitimate financial hardship for short sale?
A hardship can be defined as a material change in the financial situation of a homeowner that is or will affect their ability to pay their mortgage. Homeowner must have a hardship in order to qualify for a short sale.
Examples of acceptable financial hardships are:
Loss of job
Business failure
Damage to property
Death of a family member
Severe illness
Inheritance
Divorce/Seperation
Mandatory job relocation
Medical bills
Military service
Payment increase or mortgage adjustment
Insurance or tax increase
Reduced income
Too much debt
Incarceration
A homeowner does not have to already be late or facing foreclosure to qualify for a short sale. Generally speaking, if the homeowner has a monthly short fall and does not have enough savings to cover more than three months worth of short fall. The homeowner will be viewed as facing eminant default and thus can pursue a short sale.
Links below will direct you to additional information related to short sale:
With your financial future on the line, you need a specialist! We urge you to contact us today if you think short sale might be right for you. I will contact you right away to discuss your situation in strict confidence.
