Short Sale Information | SolutionsLVH2023-01-22T16:30:06-07:00
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Short Sale Information and Solutions
Is the answer yes – We have a team of Certified Distressed Property Experts® that can help you with your short sale.
What is a Short Sale?
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 to market and sell the property as a short sale. This requires approval from the lien holder(s) and sometimes third party investors.
In brief, a Short Sale is when a lender agrees to accept less than the amount owed on a mortgage in order for a property to be sold. In addition to being “underwater” on their mortgage, the seller must have a verifiable hardship that is accepted by the lender, must have a monthly shortfall on income and thirdly, be financially insolvent.
The Short Sale process has improved dramatically since April 5, 2010. That is when the US Treasury implemented the HAFA Short Sale program. Up until that date, the Short Sale process was not standardized, and thus led to much confusion and delays, so Short Sales had the reputation of taking forever to close and often not reaching the closing table. There has been a marked improvement in how quickly deals close, and indeed participating lenders may be penalized if they do not adhere to these stringent timelines. If you are a buyer and had been conditioned to avoid Short Sales, you may want to reconsider as deals now close much faster than before and there are some excellent values on offer. Short sale explained
Will I qualify for a Short Sale?
As your Scottsdale Phoenix Short Sale REATORS®, we will help you determine if you are a good candidate for a Short Sale. Watch this video for a brief overview of the requirements.
We keep hearing about HAFA, what is that?
HAFA stands for Home Affordable Foreclosure Alternatives program. It is a standardized program which most large lenders and some smaller ones have agreed to honor. It sets out specific guidelines and timelines to qualify homeowners and respond to offers and terms.
The Original HAFA Short Sale program applied only to non GSE lenders, meaning those who did not resell their loans to either FannieMae or FreddieMac. As of August 1, 2010, both Fannie and Freddie have implemented their own versions of the HAFA Short Sale program, so now most homeowners should be able to take advantage of one of the HAFA Short Sale programs. It is important to note that all of the HAFA Short Sale programs are due to expire on December 31, 2012. There is current legislation to extend this program however; it must be passed by the congress. Do not place any bets that this legislation will pass, Mitigate your risks and take action on what’s available to you today.
Which HAFA program applies to my loan?
As your Scottsdale Phoenix Short Sale REATORS®, we will assist you in determining which HAFA Short Sale program you may qualify for and we will explain in detail the requirements and benefits that apply. You may search online to see which program your loan may fall under.
If your loan is not found on either of these websites, then you may qualify under the original HAFA program. Not all lenders participate in the HAFA program, so if your loan happens to be with one of those non-participating lenders, they may have their own guidelines for a Short Sale. Your Scottsdale Phoenix Short Sale REATORS® will exhaust all of the possibilities to help you to complete a Short Sale and avoid Foreclosure.
Should we try a Loan Modification before a Short Sale?
As your Scottsdale Phoenix Short Sale REATORS®, one of the things we will review with you prior to beginning the Short Sale process is if you should attempt a Loan Modification first. It has been widely reported that the Loan Modification program administered by the government, called HAMP, has been less than successful, but it may be an option for you.
CAUTION: You should not pay upfront fees to anyone other than an attorney for assistance with a Loan Modification or a Short Sale. Watch and learn more about Loan Modifications vs. Short Sale in the video below.
Why would a bank agree to a Short Sale?
Many homeowners are hesitant to attempt a Short Sale because they think their lender would not cooperate. This is a myth and in fact the opposite is true. Banks will always prefer a Short Sale to a Foreclosure. The reason is quite simply that they lose less money on a Short Sale than if they have to take the property back in Foreclosure, repair and maintain it, pay taxes, pay off liens and still pay a commission to a REALTOR® to sell it later. In addition, banks must keep reserves of a multiple of the property value, which reduces the money they can lend.
What is Foreclosure?
As with a Short Sale, Foreclosure is a process, not a onetime event. It begins once a homeowner is more than 30 days late on a mortgage payment. This is called a ‘Default ‘ If arrears and late fees are not paid up and the homeowner stops paying their mortgage, the bank then files a ‘Lis Pendens‘ with the court. This puts a cloud on the title and warns others that a lawsuit is pending. The next stage is a ‘Final Judgement’. Here in Arizona, due to backlogs in the court system and internal bank policies it is possible that it could take from 10 to 18 months for a final judgement to be issued. Once the bank secures a final judgment they then petition to establish a ‘Sale Date’ and notify the homeowner of this date in writing. The homeowner may have from 30 to 60 days before being evicted from their home once they receive notice of the sale date.
If your property is part of a Homeowner’s Association and you fall behind in monthly maintenance or association dues, the Association has the right to Foreclose on your property. In this case the timeline is usually shorter.
Please consult with an attorney if you have specific questions about the Foreclosure process.