August 8, 2012

What is a Short Sale and How do I Qualify?

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 like Dante “The Realtor” with Posh Realty 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:
  1. 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.
  2. A short sale candidate also has negative equity in their home.
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. For this point it can take anywhere from 30 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 the bank place a judgment against me for the difference between what I owe and what the home sells for?
What you should know is that California 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 contact Dante “The Realtor” and he will discuss this in further detail with you.

I’m behind on my payments. How long until the bank forecloses on my home?
Most notes give the bank the right to file the foreclosure notice as soon as you are 30 days behind on your mortgage. However a new law known as the “Homeowners Bill of Rights,” prohibits lenders from seizing a home while considering homeowner requests for alternatives to foreclosure. It also lets homeowners take legal action to stop foreclosures and seek monetary damages if a lender violates state law. 
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.

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