Short Sale Questions

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. In some circumstances we have taken over the deed and caught up the existing mortgage, call us to see if you may qualify.

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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