Short Selling or Not Short Selling, That Is The Question
You have probably already heard of the term Short Sale (SS). This is when a seller (usually one in current financial difficulty) attempts to sell his home that is worth less than the amount he owes on his mortgage. The bank must approve the loss you are making as a result of the sale, and once approved, the SS can close with a new buyer in your place.
There are more than 7 million homes in trouble today; This means the home is behind on its payments or the home is already in foreclosure. The sad part is that in about half of the homes that are foreclosed on in this country, the owners didn’t (or didn’t know how to) do anything about it. Banks today are hurting and NEED to look at alternatives other than foreclosure, and a successful SS has become the process of choice to absorb the overwhelming amount of distress sales that are piling up across the country.
In a short sale, the seller remains the owner while negotiations take place with the bank regarding the terms of the sale and how the sale will affect the seller’s financial future. Of course, it would not be advisable for you to do this on your own; you would want someone who has experience and tenacity in dealing with a large financial institution and your financial future on your side.
I have been successfully negotiating short sale transactions since 2006 (before most big banks had SS departments). You don’t become an expert in short sales by taking a weekend class; it comes from experience through the total number of short sales you have successfully closed and how well the clients ended up after all was said and done. Also, homeowners who are currently struggling financially should know that there are several options to help them depending on their situation and what they want to accomplish. Many people bury their heads in the sand and choose to ignore all the bad things going on around them and let their home be foreclosed on right below them. Foreclosure destroys your credit and is the worst thing to do. On the other hand, doing a short sale is the best thing you can do for yourself, assuming you’ve done your research and tried to find alternatives to staying in your home. There are government programs to help homeowners stay in their homes and people in general need to know that programs like these exist and that they are a viable option. For many homeowners, the hardships are too severe to justify staying in the property no matter how the loan terms are readjusted, and a short sale becomes the most logical and reasonable solution.
Making a short sale can be very easy, but for many people it is a long and stressful process. They used to be almost impossible to do because there was no prior set on how to deal with them just a few years ago. Today, all banks have dealt with Short Sales, and most have reinforced staff teams dedicated to processing these short sales files. As a result, the more Short Sales that are approved and closed, the more regular the process will be, and most banks will conduct them in a similar manner, making it easier for agents to set up files for success when starting the trade. to SS.
It goes without saying, but a short sale will affect your credit and can have significant tax and legal ramifications. Your agent should advise you to speak to the necessary professionals to inform you of your position and what your risk is in terms of the consequences you may have if you go the SS route. In my experience, most of my clients are better off doing an SS. It is rare that they are actually better off doing a foreclosure. Your status will be determined based on your loan history (did you refinance?) and the occupancy status of the home in question (are you an owner or an investor?), among other things. Depending on the state you live in, these determining factors change how banks can go after you, so you want to make sure you make the right decision from the start.
Most people will benefit from short selling, and my best advice is to find someone who has dealt extensively with banks. If your real estate agent is a friend but knows nothing about short sales, forgive the relationship and go with a professional unless you want to risk losing their friendship because they messed up negotiating and communicating with banks. Banks are interested in what they can get from you throughout the process and a less experienced agent can cost their clients a lot of money, while an agent like me rarely, if ever, sees that it is required a contribution from the seller to fall short. -sale approval.
Today the government has implemented a short sale program which is the program you’ll want to opt into initially with your agent, because if you can qualify, it’s the best deal in town. The Home Affordable Foreclosure Alternative (HAFA) program is the government-sponsored program launched this year to help struggling homeowners quickly sell their home short without legal consequences and with some cash in their pocket for mortgage costs. moving. This is by far the most promising and beneficial program to date and is becoming more widespread as more and more homeowners find that they have options. With this program, not only can you gracefully withdraw from your home and your mortgage obligation, but you will do so without any legal recourse from the bank. In other words, the bank can’t go after you after the short sale no matter what, and they’ll give you $3000 for moving costs after all is said and done. This is a big difference from a normal short sale where the bank doesn’t want the owner to get anything at all (and it makes sense because the bank is making a substantial loss so they realize why the owner should go with the money). ?) With HAFA, all the possible bad things that can happen from a short sale essentially go away (not including the impact on your credit) and you end up with cash in hand; That’s why this is the best program I’ve seen to date.
Why does the bank agree to this? A short sale is the best option for a bank because they typically get more money from this process than they do from foreclosure. From the numbers I’ve seen, on average the bank gets 10% more value from doing a short sale compared to a foreclosure. In a short sale, the real estate agent and seller essentially find the buyer for the property and all the bank has to do is hit the approval button. Compare this to a foreclosure where foreclosure costs, legal fees, maintenance costs, upkeep and repair, property taxes, and paying a full commission to a real estate broker to list foreclosure, and you can see why going the short sale route is beneficial to both the bank and the borrower.
2011 will be a year in which short selling will capture a majority share of the market. It also creates the most opportune moment for someone to make an SS that could desperately benefit from one. No matter what the future holds, my goal is to help you take control of your financial destiny to put you in the best position to succeed. I hope this information has been helpful in making you aware of the current short sale market. Be an advocate for yourself, get informed and take action today. Good luck!