A short sale, simply, is when you need to sell your home and you owe the bank more than the home is worth. So, you would show the bank you have a specific “hardship” that predicates them forgiving the difference between what you owe and what the home sells for. If you would like specifics on what “hardships” the bank is looking for in order to approve a short sale of your home or investment property, contact me directly.
Why Short Sale?
If you’re considering a short sale at this point, then you’ve probably already done the loan modification macarena and bankruptcy mambo. Reality has begun to set in that it does not make sense to keep throwing money away on your upside down house. Or perhaps, you NEED to sell for a job transfer and are simply in a “short sale” situation. Why do a short sale rather than mail your keys into the bank or walk away and just wait until the bank forecloses? Three main reasons:
- Your credit rating takes a significantly smaller hit in the long run. For a bank to approve a mortgage, typically if you have a foreclosure on your credit, then you would need to wait 7 years to get the best interest rates. With a short sale, it is 2 years. Think about this, you can get a home deeply discounted in 2 years if you make the right decision and short sale rather an ignore everything.
- Another is relocation funds. Banks will typically give more in relocation funds to homeowners that short sale rather than do a deed in lieu (turn in the keys). The only benefit of a deed in lieu is the homeowner is typically offered some smaller amount of relocation funds to turn in keys, if they are not approved for a short sale (you do not have a legitimate hardship).
- You can stay in your home mortgage free until the home sells, which is 3-6 months in most cases. In San Diego, typically that equates to $10,000 or more!! I tell folks to pay down their debt and try to be as debt free as possible when they move out. You can use relocation funds to move.
Frequently Asked Questions
There will be quite a few blog articles that cover the gamut of short sales under the Blog Topics section. Feel free to explore there, but I’d like to address some frequently asked questions about the subject here. You can always, of course, contact me directly. I WILL get back to you!
How Do I Qualify for a Short Sale?
In general, before the prevalence of FHA home loans, you could qualify for a short sale simply by finding a buyer who would pay more for your property than the lender would expect to net in a foreclosure sale. You also would need to show a hardship, but its the money they mainly cared about. But now, if your loan is FHA, it can have some extra steps added to the process, which I go in to detail here.
Every lender has different guidelines, but in every case, you will be asked to provide a hardship letter with supporting documentation to prove you need a short sale. You will also need to fill out an application, along with listing your home for sale and getting an offer at market value for your home!
How Long Does It Typically Take to Complete a Short Sale?
In general, the majority of short sales processed by us will be between 3 to 6 months for approval, some faster, a couple slower. I can’t predict exactly how long it is going to take but I can give a timeline on what the typical short sale looks like:
- List the home, find a buyer and submit your package to lender: 30 days
- Negotiate and receive an approval letter: 30-60 days
- Escrow and closing process: 30-60 days
Bottom line is, this takes the time it does because you are asking the lender to forgive a substantial amount of money and to cancel a contract your signed with them to purchase or refinance your home. They are going to make sure its in their best interest to move forward with this.
Who Pays For All The Expenses of a Short Sale?
The lender is going to be on the hook for this. They’re going to be covering settlement costs, taxes, title and escrow fees, and real estate commissions. Other items, if applicable, include second mortgages, tax liens, and HOA dues that are in arrears.
I understand this info only begins to scratch the surface of what a short sale consists of, but at least you can kind of get a feel for what you’re in for. I encourage you to contact me directly to get the best possible advice on your specific situation.
QUESTIONS? COMMENTS? CONCERNS?
Contact me directly, I would love to hear from you! And I WILL get back to you!