Short Sales – What to do in a Short Sale Situation
Need to ease the pain of an unstable and confusing real estate market?
FAQ’s About Short Sales in the Scottsdale Phoenix Arizona Metro Area
What is a Short Sale?
A short sale is a real estate transaction in which the seller owes more on the property than its current market value. If the homeowner is unwilling or unable to pay the sale costs and liens encumbering the property he/she can hire a trusted real estate professional to market and sell the property as a short sale. This requires approval from the lien holder(s) and sometimes third party investors.
Would I qualify for a Short Sale?
There are 2 main qualifications for a good Short Sale candidate:
- A short sale candidate is a homeowner who has a financial hardship. This could be due to sudden change in monthly household income, loss of job, illness, divorce, and more.
- A short sale candidate also has negative equity in their home.
Negotiate my Short Sale
SEEK LEGAL COUNSEL BEFORE ATTEMPTING ANY SHORT SALE! It’s important you understand the potential consequences of short selling. A real estate attorney is best suited to advise you on how to proceed and explain your alternatives. Once you feel comfortable with moving forward make sure the REALTOR® you hire is experienced and understands the work required to see you through to the end. A properly trained short sale agent knows how to qualify you for a short sale transaction and therefore has a very high success rate. Ask lots of questions and make sure they keep you updated regularly on the progress.
How long does a short sale take?
Every short sale is different. Once a buyer and seller enter into a contract it’s sent to the seller’s lien holder(s) for approval. From this point it can take anywhere from 45 days to six months depending on several factors including persistence of the negotiator, number of lien holders and private investors involved and timeliness of seller to submit updated documentation.
As the seller am I required to pay the Realtor commissions?
Commissions are generally paid by the bank. Clarify this with your agent up front so you are not taken off guard at closing. Some agents will team up with a “short sale negotiator” and charge an up front non-refundable fee. Know your total out of pocket expenses prior to listing your home as a short sale.
Are there tax ramifications to a Short Sale?
Depending on your unique situation as a seller there may be tax ramifications. We are not qualified to give tax advice but we highly recommend you discuss this with your accountant or CPA before short selling your property.
Are there credit consequences to a Short Sale?
If you’re behind on your mortgage payment(s) your bank(s) have the right to report this to the credit bureaus. After going through a short sale or foreclosure most sellers have multiple late payments showing on their credit report. When this occurs it does have a direct affect on your credit.
Can they place a judgment against me for the difference between what I owe and what the home sells for?
This is a good question that is best answered by a qualified real estate attorney. What you should know is that Arizona is currently an “anti-deficiency” state which under certain circumstances prohibits lenders from suing a seller from losses on their home. To see these circumstances you can go to Arizona Revised Statutes, Title 33, Chapter 6.1.
I’m behind on my payments. How long until the bank forecloses on my home?
Most notes (the “I Owe You” document that you signed with the bank when you first qualified for your loan) give the bank the right to file the foreclosure notice as soon as you are 30 days behind on your mortgage. However, they often do not file this for 90 days or more. Each bank has a different time frame.When the official foreclosure notice is filed there is a 90 day period of time between the filing and the actual “foreclosure sale” or “trustee sale.”
In some cases there may be help available by way of the new stimulus plan. To see if you’re eligible check out the government site Making Your Home Affordable.
Obama Proposes Mortgage Refinancing Plan to Aid Millions of Homeowners
The Obama administration announced its latest plan to help troubled homeowners, enabling an estimated 3.5 million underwater mortgage holders to refinance at today’s historically-low interest rates.
However, experts speculate the proposal—which is expected to cost up to $10 billion and would be paid for by imposing a fee on major banks—could have a difficult time getting Congressional approval.
This proposal follows a string of government-initiated programs that have had mixed success, including the Making Homes Affordable Program. The difference is, Obama’s latest plan
would assist borrowers with private (non-government backed) loans.
Under the current proposal, to be eligible borrowers must:
- Have not missed a mortgage payment in the past six months, and have no more than one late payment in the six months prior;
- Have a credit score of 580 or higher;
- Have a current mortgage balance within loan limits for FHA-insured loans in their communities; and
- The property must be their primary residence
As an agent, it’s important to understand the details and restrictions of the program so you can effectively advise your clients on their options. This proposal is already getting a lot of attention by the media, and distressed homeowners may view this as a viable solution to their problems.
However, it’s important to remember that this program would require Congressional approval, which may never happen. If you are on the edge of facing foreclosure and need help, don’t let the media talk of this proposal distract you from finding a real solution now. Later may be too late for any action to save your financial situation.
Short Sale Help
Call or email us with any questions. We’re here to help. If you want to read more about the short sale process we have the information you need for short sale help that can help you.