HISTORY OF SHORT SALES

Major mortgage companies, loan service organizations, and private lenders began to accept short sales (banks accepting less than what is owed on a loan) with the inception of so called ‘sub-prime’ lending in the 1990's. Homeowners with less than perfect credit, or who had little equity in their home, and who fell behind in their payments, typically could not sell their home through traditional means and realize enough profit to cover the expenses associated with a home in pre-foreclosure or foreclosure (principle balances, late fees, attorney's fees and closing costs).

After calculating the rising costs of foreclosures for lenders and mortgage servicers, the short sale was conceived as an alternative solution to a growing problem. Today, the average savings to lending institutions which allow a short sale is estimated to be $25,000 or more per property.  For lending institutions this is typically enough incentive to continue to accept short sale offers on distressed properties.  Companies like The Faulkner Real Estate Group, LLC have developed an expertise in executing this process on behalf of homeowners seeking to keep a foreclosure off their credit bureau report.

 BENEFITS OF A SHORT SALE

 
Short Sales present a unique opportunity for Homeowners, Mortgage Lending or Servicing providers alike.  A short sale can truly be a win/win for all parties.  By accepting a short sale a lender minimizes the time and costs associated with a foreclosure. In turn, homeowners receive an opportunity to avoid or minimize the damaging affects of a foreclosure. Helping the homeowner through a short sale likewise benefits the prospective buyer who is able to purchase a property selling below market in many instances.   A short sale is often the homeowner's best opportunity for a fresh start. For the latest updates and short sales incentives from the US Treasury Department click here!  http://bit.ly/kI34J

 
WHAT HOMEOWNERS NEED TO KNOW

 How do I qualify?

Qualifying for a short sale is based on financial need. All lenders require proof of financial hardship. FHA, VA, conventional loans specify criteria which must be met to qualify.  Additionally, mortgage lenders and loan servicing organizations may have their own regulations regarding who may or may not qualify.  Typically, the homeowner who has fallen behind in their payments can qualify for alternative payment programs and/or a short sale. The earlier help is sought by the homeowner in distress, the higher the likelihood of success.

How much time before the actual foreclosure (Courthouse Auction)?

The foreclosure time line varies from state to state.  There are laws in each state which set forth your rights as a homeowner. Some states also have redemption periods which allow the homeowner more time after the foreclosure sale to continue to work through a short sale or other loss mitigation plan. Your loan type will also play a factor in the time you have before a foreclosure sale.  The Faulkner Real Estate Group, through your completion of the Borrowers Authorization form, can determine the options available to you, and how much time you may have to complete the sale of your home or otherwise workout an alternative to foreclosure with your lender.

 Why not just let the home go to foreclosure sale?

A foreclosure does tremendous harm to your credit, and potentially to all future credit-required purchases. A foreclosure can prevent you from obtaining another home loan for as much as seven years or more.  Typically, a foreclosure remains on your credit bureau report for long as seven years.  Inability to qualify for home ownership is not the only downside to a foreclosure because most apartment communities will not rent to prospective tenants who have a foreclosure on their credit.  Foreclosures also seriously inhibit an ability to make any major purchase where credit is necessary.  And finally, the mortgage lender may seek a default judgment against the homeowner for the difference between what is received at auction and what was owed at the time of foreclosure.

What is a deficiency judgment?

 This is when the lender holds you responsible for the unpaid portion of the loan. The lender may be allowed to take further legal action such as garnishing wages to pursue payment based on the laws of your state. Some states have restrictions and regulations on deficiency judgments, but most do not. Lenders may choose to pursue a deficiency judgment or to write off the loan.  This information is available from the mortgage lender or loan servicing organization.

 What is the benefit of a short sale vs. foreclosure?

The benefits of a short sale are numerous. First, you may avoid a foreclosure on your record. This is more than worth the effort to perform a short sale on your property. Second, a deficiency judgment or tax liability can either be avoided or minimized during the short sale negotiations with the lenders. Finally, a short sale will allow you time to find a new place to live on your own terms instead of facing a possible foreclosure related eviction.

 Why would my lender want to perform a short sale to help me?

The reason is simple; a short sale has a better return on investment to the lender than a foreclosure. Lenders created the short sale process as a foreclosure alternative. The incentives to perform a short sale on your property are in place to motivate you to participate. In May 2009, the Treasury Department announced two new programs to help distressed homeowners avoid foreclosure.  One program will provide incentives for lenders to modify mortgage terms, and the other will streamline the short sales process.  

 Is it too late to perform a short sale?

 Unless you have been evicted from your property, there is most likely still time. Mortgage lending providers can offer auction date postponements based on certain criteria. Some states have laws to assist you in seeking a postponement, where others offer redemption periods.  The Faulkner Real Estate Group will help you assess the situation.

 What does the lender stand to lose by foreclosing on a house?

A bank does not want land or houses as a substantial part of their portfolio. From the beginning, a foreclosure is not in a bank’s bests interests.  However, they will have to be convinced that the trouble of a foreclosure or an REO is worse than taking less than they are owed on a loan. 

* If you are behind on your mortgage and are considering a short sale, please email us for a confidential consultation or for a copy of the HUD Pre-Foreclosure Program outline.  The sooner you act...the better!  We've been short selling properties since 2005! We have the expertise you need!