Going Back to Short Sale Basics

To avoid foreclosure, a homeowner needs to explore all options available and try to determine which one will work to their advantage. Among the many options available, a short sale has proven to be quite effective not only in terms of stopping foreclosure but also in protecting your credit. Of course, before you choose this option, you will need to be familiar with the entire process involved in order to understand what you are getting into.

For the unfamiliar, here are some of the short sale facts you need to learn about:

  • Short sale transactions involve the lender approving the sale of the distressed property at an amount less than what is owed to them.

  • Homeowners with underwater mortgages, or owe more in a mortgage compared to the home’s equity, usually choose to sell via short sale.

  • A buyer’s offer is submitted together with the other short sale requirements, subject to lender review. The lender can choose to reject, accept or make a counter offer.

  • A short sale proposal includes all documents which support your claim of financial hardship such as income tax returns, statement of assets and liabilities and even pay stubs. You also need to submit a hardship letter, wherein you will explain in detail the circumstances which resulted to your decision to sell your home via short sale.

  • Short sales can be lengthy and complicated so, you need to make sure all lines of communication are clear in order to avoid delays. Work with a short sale Realtor and take advantage of their expertise and experience.

  • Buyers can suddenly change their minds especially if the lender does not respond quickly to the proposal. It is best to reassure buyers and keep them constantly updated.

  • More and more lenders are choosing a short sale over foreclosure because they incur fewer expenses. Homeowners should take advantage of this and make an effort to submit a complete proposal so lenders will have no reason to reject them.

Some Words of Advice to Short Sale Buyers

Homebuyers who choose to take advantage of the perks associated with the purchase of short sale property should accept from the very start the entire process can be one long ordeal. Why, because, at the end of the day, it is the lender who has the final say.

Be that as it may, it does not mean you cannot control the other aspects of the short sale buying process. But in this case, taking control does not mean doing the job of the short sale Realtor or annoying the seller with repeated phone calls. It simply involves getting involved.

It would not hurt to express your intention to help out. If you have a strong financial background, you can even lend your expertise in the preparation of the financial documents or even the hardship letter. If you want, you can focus instead on your reaction to the lender response. For instance, if the lender approves the short sale, you should be ready to move into your new home. As you know, moving can be quite an ordeal so you need to be sure you are prepared for this.

You also need to be ready if the lender makes a counter offer or decides to approve the proposal on the condition they will not waive the deficiency judgment and ask the seller to contribute. If the seller decides to walk away because of this, you may be looking elswhere. Of course, there is also the chance the lender will flat out reject the proposal. In this case, you need to have a back-up plan a well.

As a buyer, you may be surprised at the myriad of things you need to consider and think about. It is the only way you do not get caught unaware like a deer in headlights. Talk to the seller or the Realtor if you have concerns. Being open about any issues you might have will help you deal with them more effectively.

Why Lenders Are Backing Off From Foreclosures (And Choosing Short Sales!)

It is surprising to note for the past months, there has been a drop in foreclosure filing in Palm Beach County compared to last year — around 70 percent. Now, the drop in foreclosure rate cannot be attributed to an improving economy or a recovering housing market. It is simply because lenders realize it would not benefit them at all if they continue to fill the market with more foreclosed homes, when the same market is already overflowing with properties.

Putting more homes in the foreclosure market will definitely reduce home values and these lenders know they are the ones who will get hurt in the process, considering their huge inventory of REOs. Aside from this, there are also the holding costs to think about such as insurance and maintenance costs.

You also have to think about the legal problems lenders are embroiled in, in particular the robo-signing controversy. It has become more and more difficult for lenders to prove their ownership of the distressed home and many would like to avoid problems because of claims of illegal foreclosures.

So, lenders are now more inclined to accept a short sale proposal to avoid the hassles which go with foreclosing a property. A short sale is certainly a lot cheaper and if owners managed to submit all the correct requirements including a good offer, then there is certainly no reason for lenders to say no to such a sweet deal.

This is perhaps what many troubled homeowners should remember. It would help your situation if you make sure your short sale proposal is perfect or at least, good enough for the lender to respond. You might need to look into hiring the services of a professional short sale Realtor to guarantee success.

In any case, what is important is keeping your expectations real and being patient.

BofA Offers Monetary Incentive to Short Sale Applicants

Distressed borrowers looking to avoid foreclosure will certainly be surprised to learn Bank of America is willing to pay as much as $20,000 if the property is sold via a short sale by August 31, 2012 through its Florida Enhanced Short Sale Relocation Assistance program. Proposals should also be submitted before November 30 for the homeowner to qualify.

A short sale has become the “go to” option of most troubled borrowers, particularly those who are suffering from underwater mortgages for the following reasons:

  1. It allows the sellers/homeowners to suffer less damage to their credit scores

  2. It allows them to pay off their mortgage debt and and become virtually debt free especially if the lender agrees not to pursue a deficiency judgment

  3. It is generally faster to conduct a short sale these days compared to a foreclosure, which can last as long as 611 days based on the national average.

Lenders like BofA have been more inclined to accept short sale proposals because of the bigger cost associated with processing a foreclosure case. In addition, most lenders are suffering from a huge backlog of foreclosure cases, referred to as shadow inventory, due to their decision to carefully check each case so there would be no more allegations of wrongful foreclosures.

Interested homeowners should take advantage of such opportunity especially since it is unheard of for lenders to offer incentives. It would be smart to work with a short sale Realtor to make sure all requirements set by the lender are met and delays can be avoided. By submitting a well-prepared proposal, you will likely increase your chances of getting approved before the deadline. Also, speak with your lender about this program so you fully understand all the policies, restrictions and other guidelines.

How to Conduct An Efficient Short Sale

The foreclosure crisis has certainly made short sales quite popular these days especially among distressed borrowers looking for way out of foreclosure as well as buyers looking to save money, but do not want to deal with much repair costs.

It is certainly good news for everyone to know most lenders are now eager to work with distressed borrowers and explore the possibility of a short sale after realizing that, in the long run, it is cheaper than a foreclosure. Troubled homeowners also enjoy fewer repercussions, in terms of their credit rating.

But those of you who are considering a short sale should understand it requires lender approval, which is actually dependent on how well you have prepared your proposal. You need to accept now, it is the only way and work on ensuring efficiency on your part.

So how do you conduct an efficient short sale?

For starters, work with a professional, preferably a short sale Realtor, in order to make sure you know exactly what you need to do to encourage lender approval. It is crucial you submit all required documents plus other evidence of your financial hardship. You need to keep in mind the lender will be approving your proposal and basing their decision on whatever files you submit, so you better make sure you have enough to convince them.

It is also important you keep all lines of communication open between you and the buyer, lender and most importantly, the Realtor who will be representing you and protecting your interest. With time against you, you need to work hard to avoid delaying the process because you failed to submit a requirement, speak with your buyer or respond to your Realtor.

An efficient short sale actually relies on the seller being involved, so you should make an effort to know what is expected of you and what is going on.

Buyer’s Guide: What You Need to Know About Short Sale Homes

It cannot be denied homebuyers have it good these days. Real estate market conditions are certainly putting all advantages on the buyer’s side with the historically-low mortgage interest rates and large inventory of affordable homes for sale to choose from leading the list. Of course, in these tough times, budget is the primary consideration for all home buyers. The good news is there are short sale homes you can turn to.

For certain, you would have heard about these homes since they are fast becoming popular among first time homebuyers and real estate investors, primarily because of their cheap prices. But in case you are really not knowledgeable about these properties, here are some facts you need to know about them:

Why They Are Called “Short Sale” Properties

In real estate, a short sale generally means selling a property for less than what is currently worth in the market to clear the mortgage debt. Clearly, there is the role of the lenders to approve the sale because they are the ones who stand to lose more.

Homeowners who usually consider a short sale transaction have usually found themselves experiencing financial hardship and could no longer afford the mortgage payments. In many cases, the reason for the short sale is the decline in the property’s value, making the amount of the mortgage debt bigger. For obvious reason, a short sale will help the owner avoid a foreclosure.

Why Choose Short Sale

As you can see, there is an element of desperation in owners selling their home via short sale. This means negotiation can be quicker and simpler and it is only a matter of making sure all the paperwork is accomplished and delivered to the lender as soon as possible. Most sellers work with a short sale Realtor and it would work to your advantage if you also work with him.

It would be best to enter the transaction with your eyes open and not expect the process to be as quick as you would like it to be. The waiting is probably the most challenging part but if you are really patient and both the seller and Realtor have done their work, the chances of getting the short sale approved is greatly increased.