This Short Sale information will provide you with a better understand of the short sale process to help you decide if a short sale is appropriate for your situation. At Promised Land Realtors we are Short Sales and Foreclosure Resource certified and here to help you through the short sale procedure.
How can I get out from under the debts on my home? - If the market value of your home is less than what you owe on your current mortgage, you may qualify for a legal, lender approved solution known as a Short Sale. A Short Sale can be accomplished by negotiating with your bank or lending institution to accept a sale of your property to a third party buyer for less than what you currently owe on your mortgage balance.
Can a Short Sale Help Me? - The short sale of real estate is not a common practice in today's real estate market, it may be a necessity. The short sale transaction is a legal and much more beneficial alternative to foreclosure or even bankruptcy. Lenders are motivated to accept short sale offers to for a number of good reasons. The short sale of your home can result in a win-win-win situation for all parties involved:
Win #1: You win by getting out of a financial difficulty and salvaged your credit score. Your property is saved from foreclosure, thus helping you to save your credit rating. Allowing you home to proceed into foreclosure may unfavorably affect your credit for up to 7 years.
Win #2: The lender wins by avoiding timely and costly foreclosure proceedings which could lead to an even more costly expense of ownership of the real estate by the by the bank.
Win #3: The buyer of your property wins by getting a solid property at a good market value.
Top 10 Frequently Asked Short Sale Questions
1. What is a real estate Short Sale? - A real estate short sale is a form of agreement between the seller of a home in the beginning stages of foreclosure and their lender, allowing the home to be sold for less than the existing loan balance outstanding. The mortgagee would accept less than the loan amount in order to avoid a foreclosure proceeding. This short sale would result in a substantially discounted purchase price for the buyer of the home. The buyer would then proceed with the purchase of the home much the same as in any conventional realty transaction.
2. How late in the pre-foreclosure process can you start a short sale? – According to Georgia state law and regulations, a foreclosure can proceed as quickly as 30 days from the date the notice to the borrower is filed. For that reason, time is of the essence.
3. Will a lender allow a real estate short sale when the seller has some a good amount of equity? - If the home has some considerable amount of equity, the lender may choose to continue with a traditional foreclosure proceeding to regain title to the property and dispose of it at a market price.
4. What documents are necessary to proceed with a short sale? - The individual documents necessary to proceed with the short sale will depend on the lender. Typically the lender will require hardship letter detailing the circumstances behind the short sale. A signed, valid purchase and sales contract, preliminary HUD-1 settlement statement and a preliminary estimate of proceeds to the lender. There may be additional requests for more detailed information on the financial condition of the seller, such as, pay check stubs, bank statements, a personal financial statement and monthly budget assessment, amongst other things.
5. Will the seller’s credit rating be affected if they allow a short sale on their property to occur? - While it is up to the individual lender to decide what to report, often the loan will report as "paid off" on their credit report. However, there will likely be a reference that says "settled for less than originally owed" also the late payment show on your credit report. Nevertheless, it is better to have late payment and a short sale referenced than to have a foreclosure on your credit report.
6. Will a lender allow the seller to make a profit on a short sale? - By the nature of the transaction, the seller is not going to make a profit on the short sale because their current loan balance will be higher than the selling price of the home.
7. If a seller is in bankruptcy, will that affect the short sale of the property? - Absolutely, as most lender would not consider a short sale if the homeowner is in the middle of a bankruptcy proceeding. Negotiating a short sale between the parties is considered a collection activity and such a negotiation is prohibited in bankruptcy.
8. Will the lender require an appraisal on the home in a short sale? - The lender will need some formal assessment of the value of the home in order to make a decision as to accept or reject the short sale offer. Most lenders accept a BPO or brokers price opinion.
9. Are there tax implications in the short of real estate? - Much like the issue of credit reporting, the circumstances are individual to the lender. As a short sale represents a loss for the lender, they can report the amount lost a debt forgiveness to the seller. If a formal tax form 1099 is filed, the seller may be responsible for paying taxes on the amount of debt forgiveness.
10. Why would a lender allow a short sale to occur? - Quite simply, it may benefit all the parties involved in the transaction. The seller is relieved of the home they cannot afford. A costly foreclosure proceeding by the lender is avoided and the buyer purchases the home at an attractive price. There are other options to foreclosure and we're here to help you get a better understanding of what they are.