In a short sale, a homeowner’s lender agrees to accept less than is owed on the mortgage for the property. It’s a useful alternative for borrowers underwater on their mortgage and on their way to foreclosure. As home prices continue to decline, short sales have become a viable option for those who need to sell.
For more information regarding brokerage services, click here.
New Treasury Department Rules Designed To Expedite Short Sales
Are Now In Effect
What to expect:
- Seller must be unqualified for a loan modification under the Home Affordable Mortgage Program or unable to afford the modification.
- The bank will set an acceptable value of the home upfront, based on appraisal or broker’s price opinion.
- Lenders must approve or deny a purchase offer within 10 days of it being submitted.
- Once the bank approves a home for a short sale, sellers may stop paying all related mortgage payments, and unpaid mortgage debt will be forgiven.
- These mortgage payments will not be shown as late on credit reports.
- At closing, sellers are entitled to as much as $1500 from the government to cover relocation expenses.
Saving Your Home From Foreclosure:
Mortgage Loan Workout Options:
- Forbearance – Lenders may let you make a partial payment, or skip payments, if you have reasonable plan to catch up.
- Reinstatement – refers to making payment that covers all of your payments.
- Repayment plan – If you can’t afford reinstatement, but can start making payments to catch up, the lender may let you pay an additional amount each month until you are catching up.
- A Loan Modification is the process of modifying your existing loan to make your payments more affordable. The purpose of a loan modification is to provide you with a mortgage payment you can afford. It’s actually very similar to a mortgage refinance but instead of finding a new mortgage that you can afford, this just modifies your current mortgage into something you can fit into your budget.
Deed In Lieu Of Foreclosure:
A deed in lieu of foreclosure occurs when the borrower agrees to trade the property to the lender in exchange for the cancellation of of the note. Market conditions as well as state specific laws will influence whether and how a lender accepts a deed in lieu of foreclosure. Typically, lenders are less willing to consider a deed in lieu of foreclosure in declining market.
If the above method does not work, you may qualify for short sale:
A short sale is a situation in which the seller (1) owes more money on the loan (and any other liens on the property) than what the sale of the property will likely produce on the market and (2) is unable or unwilling to bring money to closing. In a short sale, the lender has not yet foreclosed on the property, which provides a window of opportunity for the owner to sell the property in order to at least partially satisfy the amount owned to the lender.
Short Sales vs. Foreclosures:
1. Short sales lessen the impact that home foreclosures may have on the surrounding community.
2. A short sale won’t damage the distressed property owner ‘s credit as much as a foreclosure.
Pratt, Aycock & Associates, PLLC
Meleah Ayres, CPA & Sue Whitehurst