Short Sales Frequently Asked Questions
We have dealt with many short sales and, along the way, have discovered that most sellers are unfamiliar with all of the options they have when it comes to selling their home if they are experiencing hardship. While a short sale may not seem like a simple answer to most, it can help an underwater homeowner out and has very fewer adverse effects over time. Here are the top five Frequently Asked Questions that we receive here at Blue Moon Realty Group.
Q: What is a Short Sale?
A short sale is defined as a lender willing to accept less than the full amount that is due on a mortgage when a property is sold. Keep in mind that not every lender will allow a short sale to occur, but it never hurts to ask if you are in a situation where a short sale may be the answer to your financial hardship.
Q: Do banks prefer to do a Short Sale or a Foreclosure on the property?
In most cases a lender will opt for a short sale over a foreclosure as there are more expenses and also a longer timeline associated with the foreclosure process. This isn’t always the case though as the bank looks at what will bring them the most money. Before deciding which method is best for your situation, you should consult a financial/ tax advisor and also get legal advice.
Q: When dealing with a Short Sale situation, is the lender easy or difficult to work with?
While this all depends on the specific lender, by and large most lenders are willing to work with you to get the property sold. Lenders will also go to great lengths to make a short sale work (as opposed to foreclosure) if the property needs work, as the foreclosure process is more difficult to complete on a property that needs work. The timeline for a short sale varies from one property to the next but the general timeframe is 3 to 4 months (give or take).
Q: How do I know if a Short Sale is right for me?
While the short sale scenario varies for each individual situation, there are a few key factors that a lender will take into consideration in order to determine if you are eligible for a short sale:
• Is it difficult to cover your monthly expenses?
• Are there hardships that you have experienced since the purchase of the property?
• Is more owed on the property than you could sell it for?
• If you have an ARM is the interest rate/monthly payment set to adjust?
• Are you currently behind on your mortgage payment?
Q: Does a Short Sale or Foreclosure effect my credit?
The answer varies from one situation to the next as everyone’s credit score and situation are unique. Although both a short sale or foreclosure will appear on your credit, the impact should be less with a short sale. Each do remain on a credit report for a period of seven years, however the impacts lessen over time. Some financial experts will advise that a foreclosure has more effect on credit than a short sale does.
While the market is now stabilizing, we realize that there are still homeowners underwater that are looking at their options and weighing them. Therefore, a short sale may be the best solution given the individual situation. There are a variety of hardships that necessitate the use of a short sale such as raise in interest rate/mortgage payment, medical bills, unemployment, divorce, health issues or loss of a spouse. If you find yourself looking into the short sale process, contact us to help you better understand the process and weigh all of your options.
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