From: http://www.paloaltoonline.com/news/show_story.php?id=8037

Homeowners unable to afford their mortgage payments can sometimes negotiate an agreement with lending institutions to sell their home for less than their mortgage debt — preventing foreclosure, a harrying process for both lenders and sellers — and, in many cases, absolving debt while preserving credit.

“Both short sales and foreclosures are considered ‘negative information,’ so they stay on the credit report for seven years,” said Patricia Guertler of Consumer Credit Counseling Services (CCCS), a nonprofit organization offering free counseling to homeowners. A foreclosure, however, is more damaging to credit than a short sale, she said.

While a short sale is still a mark against a homeowner, “credit is something that can be rebuilt — and if the damage is only on the mortgage and if [the homeowner is] in good standing, it is not going to destroy credit completely. … It will drop your credit score but not [to] the point where it is completely irreparable,” Guertler said.

For a short sale to proceed, the homeowner’s lenders must accept the buyer’s offer. Lenders may refuse a short sale, particularly when a homeowner is behind on payments and the lender has taken steps toward a foreclosure.

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And sitting on one’s hands, waiting, is exactly what some professionals say is the last thing a homeowner should do.

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Though executed more quickly than foreclosures, short sales are time-consuming — for lenders, homeowners and real estate agents. To hurry the process along, . . . . . make sure paperwork is organized and submitted in a way that will get the sale approved.

“If one page is filed incorrectly, it can cause the whole short sale to be thrown out. So it is very meticulous work,” he said.

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Short sales take longer than standard sales — anywhere from 30 to 180 days, Herzberg said. In part, the process drags on because necessary procedures such as home appraisals take time. The appraisal alone can take 10 to 17 business days, Knight said. Discussions between the many players involved — homeowners, real estate agents, banking institutions, mortgage insurers, investors and others — also take time.

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When lenders do approve a short sale, sites such as MSN Money.com advise homeowners to safeguard themselves by procuring an agreement — in writing — that the sale absolves their debt. Jose Romero of Plaza Real Estate in San Jose, who has a short-sale listing in Menlo Park, has observed lenders requiring repayment. “Some banks issue what they call a ‘soft note,’ … basically a balance that the borrower would carry after they settle on the transaction,” Romero said.

After successfully cancelling thousands of dollars of debt, a homeowner may rejoice — only to discover that, to the Internal Revenue Service, the forgiven debt represents taxable income.

If you want to pursue a short sale on your home, we can help.

Contact us at 804/719-1489, or submit our short sale form to start the discussion on a short sale.

Q: What is a short sale?

A short sale is a sale of your property where the bank agrees to accept less than what is owed as an alternative to foreclosure. They agree to accept a payoff that is “short” of what is actually owed. We can sometimes convince a lender that its in their best interest to do so.

Q. How long will short sale take?

It may take weeks, or months to get an approval. Lenders have several layers of red tape. We cannot guarantee a timeline.  In today’s market, loss mitigation departments are overwhelmed and the process can take long.  For example, I’ve been working one for almost 9 months cutting through the lender’s red tape.

Q: Is a short sale guaranteed to work?

No.

If you continue to not make any payments during the negotiation process, your house will continue to auction. We make NO PROMISES that we will succeed. If the bank cannot agree to an amount acceptable to us, the negotiation process will fail.

Q. Do I have to move?

Yes. It is a short SALE. This approach will not allow you to keep your house.

Q. Can I get any money at closing?

No. Since the lender might agree to accept less than what is owed, you are forbidden to receive any money that should go to them.

Q: What do I need to start the short sale?

Contact us directly at 804/719-1489 and we will start the process with you.  We will ask you to get the following from your lender(s):

• Short sale packet. The bank may give you a list over the phone
  • Normally, a hardship letter, pay stubs, tax returns or other financial records.
• Payoff amount good thru end of the current month.
• Reinstatement amount good through the end of the current month.

The biggest reason we might be unsuccessful in short sales is that the Seller fails to give us these documents in a timely matter.  If you give us written authorization, we can get them for you.

Q. Once I get these items, then what?

We will visit the property and start going over the paperwork with you. Because of the quantity of short sales that we are asked to process, we do not start until you have received those documents from the bank. We only have time to deal with sellers who are motivated to retrieve the information we need in a timely fashion.

Q.  What if I have two mortgages?

If you have two mortgages, with different lenders, we might have a solution for you.    We’ve been able to successfully complete the process where different lenders are involved.

 

Ready to start?

If you are ready to pursue a short sale any where in the United States, contact us at 804/719-1489.

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