FAQs

What is a Short Sale?

A Short Sale is the sale of a home when sales proceeds do not fully pay off the existing mortgage loan and the lender accepts a reduced payoff that fully satisfies the loan.

Typically the existing lender pays the sales costs, including sales commissions, escrow and title fees and repair costs. The home is sold, the loan paid off, and foreclosure is avoided.

How do I qualify for a Short Sale?

Many mortgage lenders are willing, and possibly have government incentives, to work with borrowers faced with a financial hardship. If you find yourself in a situation where you are unlikely to meet your mortgage obligation, your lender would prefer to settle the matter with you as opposed to taking the property through foreclosure.

As you consider pursuing a Short Sale, remember your lender wants to limit potential loss of the loan. By completing a Short Sale, your lender will arrive at a solution that is better than a foreclosure.

Why do mortgage companies agree to Short Sales?

There are several reasons:

Legal Concerns - Mortgage lenders have come under legal and governmental pressure to assist borrowers to resolve situations where borrowers are unable to meet their mortgage obligation, particularly when the borrower makes an effort to arrive at a compromise solution.

Wall Street is Watching - Mortgage lenders rely on their ability to package and sell bundles of loans on the secondary mortgage market. They need to sell loan bundles in order to put the funds back to work by loaning the money again and collect loan fees along the way. If mortgages perform poorly after they are sold, it could impact the lender's ability to sell their loans on the secondary market

Asset Management Expenses - If a lender acquires a property through foreclosure, the property will be managed until it is repaired and resold. It is expensive to manage homes spread throughout a region, the state and possibly even the nation. Keeping properties maintained, keeping utilities on, making repairs and the administrative costs attached to these activities are costs the lender would prefer to avoid

Reserve Requirement - Delinquent and non-performing loans place another burden on mortgage lenders. For all delinquent and non-performing loans, the lender must set aside funds to account for potential losses. These funds cannot be put to work generating new loans until the bad loans are resolved.

Are all Short Sales approved?

No. It is critical to work with someone who has experience getting Short Sales approved.

From the presentation of the Short Sale package to working with the lender's Loss Mitigation Department, we know how to keep the file moving towards approval.

The first step is to get pre-qualified for a Short Sale by completing this application. There is no charge, and it's easy. Or just call us at 318-965-6779.

What will a Short Sale cost me?

Nothing! In most cases the seller pays no sales costs if the lender approves the Short Sale. All commissions, title and escrow fees, and even most repair expenses are paid by the lender.

Remember, lenders approve Short Sales and accept the resulting loss in an effort to avoid bigger losses through foreclosure.

How do I initiate a Short Sale?

It's easy. If you would like to prequalify for a Short Sale, simply complete the application.

If you prefer to discuss your Short Sale on the phone, or set an appointment call 318-965-6779. There is no charge to get started. Just contact us, and we will get to work.

Is deeding my property to someone else another option?

Deeding your property to someone without paying off the loan is generally a bad idea. First, the lender still considers you responsible for payment. If loan payments are not paid, or if the lender forecloses, it will also show on your credit.

Second, when you deed your property, you give up the ability to control the property. Do not deed your property to someone without paying off the loan without consulting an attorney.

What does my lender consider a valid financial hardship?

Common and frequently accepted hardships include:

• Family illness or injury
• Illness or injury in the extended family (particularly if it forces relocation)
• Job relocation when the property is equity deficient
• Job loss or significant income loss
• Divorce or split of domestic partners
• Adjustment in mortgage payment or unforeseen increase in living expenses

Will my lender consider a Short Sale if I am NOT deliquent on my loan?

Some lenders will not consider a Short Sale on a current loan. Other lenders will consider it if the hardship leads them to believe a default is imminent. The only way to know for sure is to put a Short Sale file together and submit it for consideration.

Can I complete a Short Sale if I have two mortgage loans?

Typically we work with both lenders (many times the same lender holds the 1st and the 2nd loans) to put together a Short Sale. Even if the value of your home is below the balance of the 1st mortgage, we can normally get the two lenders to cooperate because neither lender wants to own another home through foreclosure.

Can I complete a Short Sale if my property is in a state of disrepair?

Many lenders are more motivated to do a Short Sale on a property that needs work because their risk is greater when they foreclose on property that requires a lot of work.

Will a Short Sale affect my credit rating?

Avoiding foreclosure is the preferred outcome from a credit perspective. You may miss a few mortgage payments in the Short Sale process, but that will not affect your credit rating as much as a foreclosure. By avoiding foreclosure, you will likely be able to resume normal borrowing (car loans, credit cards, consumer goods and such) relatively quickly.

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I've gotten behind and missed a few mortgage payments. Now what happens?

Your lender has the option of beginning the foreclosure process. If it moves forward, you will have to leave your home, and you could still owe your lender if the house is sold for less than the remaining balance on your mortgage.

What is meant by the term foreclosure?

Most of us have heard this term often but many may not understand what it actually means. The legal process that banks and mortgage companies use to force the sale of your home to repay a debt is known as foreclosure. The most common type of foreclosure is on a home mortgage.

Generally, the foreclosure process is not triggered until?three or four payments are missed.? However, you should be aware that if you miss even one payment, a creditor has the ability to take the property back and sell it to recoup the remaining balance on your loan.

What is the typical foreclosure process?

The foreclosure laws and process often vary from state to state. However, ?the law generally requires that the borrower be given sufficient warning or notice before a foreclosure can take place.

The mortgage or loan documents signed at the time you purchased your home should outline details about the specific rights and requirements related to the foreclosure process in your state. Generally, a trustee is usually appointed and announces the public sale by auction of your home. A bidding process is opened during which someone purchases the property or it reverts back to the lendor.

I feel overwhelmed. Can I just walk away?

Do not walk away. Seek the advice of a real estate professional such as the Krohn Group to discuss your options before you give away your investment and your credit.

Is it possible to sell my home before I lose it to foreclosure?

Yes! There is an option called a "Short Sale" which is also known as a "Compromise Sale" because it usually involves a lender accepting a sale that will yield less than the remaining balance on the mortgage, but avoids a no win foreclosure. Essentially, your lender agrees to accept less than the total owed in exchange for releasing the mortgage as a lien on the property.

Lendors would often prefer to take a loss on a home instead of having it remain on their books as a non-producing asset. If you want to pursue this option, make sure to select a professional company such as the Krohn Group with significant amount of experience working with short sales to assist with the transaction.

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